Tariffs are a hot-button issue globally after the Trump Administration announced plans to place a 25% tariff on Canada and Mexico as well as a 10% tariff on China.
While the tariffs for Canada and Mexico have been given a 30-day stay, the Chinese tariffs are still a go and will likely cause both pros and cons for the U.S. semiconductor industry.
Tariffs are likely to have a disruptive impact on the entire electronics supply chain. It will likely increase electronic component pricing as well as prices on printed circuit boards (PCB), which run the gamut of anything that has a plug, according to Richard Barnett, CMO at Supplyframe.
“The hyper growth of the AI data center segment is reliant on high-layer-count PCBs, and China represents over a third of total production,” Barnett said. “Chinese firms also enjoy around 60% market share for other advanced PCBs used in AI, servers and myriad end markets.”
PCB demand is also growing in the aerospace and defense sectors, meaning all the prices in these sectors will also increase, Barnett added.
Impact on chip manufacturing
According to a new report from market research firm Deloitte, tariffs will likely have an impact on global supply chains given the nature of the semiconductor industry. This could make supply chains “more complex to administer, shifting profits, costs and more.”
That impact will be felt across the semiconductor sector including R&D and manufacturing. It will also likely affect how industry policies are shaped across different regions, Deloitte said. U.S.-companies may need to rethink their offshore manufacturing investments and activities if chip manufacturing capacity is put on the table as a potential retaliatory measure from countries being tariffed, the organization said.
Market research firm TrendForce joined the chorus of those predicting supply chain cost rises with a report that the world’s leading chipmaker and foundry, Taiwan Semiconductor Manufacturing Co. (TSMC), is likely to raise prices for advanced processes below 7 nm by more than 15% to offset rising costs due to the Trump Administration’s tariff policy. TrendForce expects these costs to be passed on to customers due to the foundry giant’s strong pricing power.
Adam Carter, CEO at OpenLight, a maker of custom PASIC designs, agreed that tariffs will lead to increased production costs in semiconductor manufacturing as well as other industries.
“This could ultimately translate to higher prices for consumers on a range of products, from smartphones and computers to automobiles and household appliances,” Carter said.
Rising GDP, rising prices
According to the McClean report, which is part of the market research firm TechInsights, 10% to 20% tariffs on all goods imported from China could raise $2.6 trillion over the next decade. That is if these countries do not retaliate against the U.S.
But even if no retaliatory tariffs happen, the tariffs are likely to raise consumer prices by 1.4% to 5.1%, or about $1,900 to $7,600 per household. This would also lower the U.S. GDP by 0.5% to 1.4%.
A Consumer Technology Association (CTA) study found that the impact of potential tariffs on consumer technology would drastically increase retail costs, lowering American consumers’ spending power by $90 billion, if the companies pass on the costs to consumers. This means consumer electronics will likely rise by:
- 45% on laptops and tablets
- 25.8% on smartphones
- 31.2% on monitors
- 39.9% on video game consoles
CHIPS Act
Both the McClean Report and Deloitte agree that the continuation of the CHIPS and Science Act will ensure that domestic U.S. semiconductor manufacturing grows, lessoning the country’s need for the outsourcing of chips and boosting national security. Similarly, a withdrawal from these incentives, as some have suggested in the Trump Administration, would make semiconductor manufacturing problematic given increased tariffs.
A good sign that the continuation of the CHIPS Act may be on the table came in late January when the U.S. House of Representatives introduced the Semiconductor Technology Advancement and Research (STAR) Act. This would extend the Advanced Manufacturing Investment Credit (AMIC), a 25% tax credit for chip production, and would expand it to include:
- Investments in chip design
- Research into mapping of chip’s circuitry and functionality
If the Trump Administration makes changes to the CHIPS Act, it will likely happen after the Inflation Reduction Act is tackled, which was voted against by all Republican lawmakers, according to the McClean Report.
Senator John Cornyn (R-TX) and Congressman Michael McCaul (TX-10) penned an op-ed in the Austin American-Statesman newspaper to the Trump Administration calling on it to not let the CHIPS Act fall away.
“By reclaiming CHIPS, President Trump has an opportunity to fulfill a core campaign promise: increase domestic manufacturing and decrease our reliance on China,” Cornyn and McCaul said. “By continuing to prioritize domestic manufacturing of semiconductors, we can increase manufacturing jobs in the United States and strengthen America’s edge in our strategic competition with China.”
Source: Deloitte
Revenue rising
The good news is that regardless of proposed tariffs, ongoing geopolitical issues and a likely expansion in export restrictions across the electronics supply chain, semiconductor sales in 2025 are forecast to rise to $697 billion, reaching an all-time high, according to Deloitte.
Additionally, the semiconductor industry is on track to reach the aspirational goal of $1 trillion in sales by 2030. This would require the industry to grow at a compound annual growth rate (CAGR) of 7.5% between 2025 and 2030. If this growth continues, the sector could reach $2 trillion by 2040, Deloitte said.
Counter-tariffs
In response to America’s tariff expansion on China, the country retaliated by restricting the exports of:
- Tungsten
- Tellurium
- Bismuth
- Molybdenum
- Indium
This comes after the country already announced it would restrict the export of gallium and germanium.
In addition to beginning an anti-trust investigation into Google, China also announced that it would start tariffs on select American imports. This includes a 15% tariff on coal and natural gas as well as a tariff on crude oil, agricultural machinery and large-engine cars.
