The Impact of Tariffs on Global Semiconductor Trade: Key Actions to Consider

Introduction

The global semiconductor industry is currently facing significant challenges due to the imposition of tariffs, which have disrupted supply chains and increased production costs. These tariffs, particularly those introduced by the U.S. administration, have led to a reevaluation of manufacturing strategies across the sector. In 2025, the United States imposed tariffs of up to 145% on Chinese semiconductor imports, prompting retaliatory tariffs of 125% from China. These measures have significantly strained the global semiconductor supply chain, leading to increased costs and uncertainties for manufacturers and consumers alike.

For instance, Advanced Micro Devices (AMD) has projected a revenue impact of $1.5 billion in 2025 due to new U.S. export restrictions on advanced AI chip shipments to China, a market that accounts for over 24% of AMD’s revenue. Similarly, the German chip-equipment maker Suss MicroTec has warned that new U.S. tariffs could severely disrupt global semiconductor supply chains and potentially trigger a worldwide recession. These developments underscore the far-reaching implications of trade policies on the semiconductor industry, affecting not only corporate revenues but also the broader global economy.

Around 30% of businesses are currently adopting a wait-and-watch approach toward the ongoing uncertainty surrounding semiconductor tariffs. This cautious stance reflects growing concerns over supply chain unpredictability. In contrast, before the introduction of the Trump-era tariffs, nearly 61% of companies had already started reshaping their procurement strategies, actively exploring alternative suppliers. This shift was largely driven by heightened geopolitical tensions, evolving global trade policies, and new market barriers, all of which increased the complexity of international semiconductor trade. Businesses now demand greater transparency to make informed decisions in this rapidly changing environment.

Strategic Realignments

In response to these challenges, companies are exploring strategic realignments to mitigate the impact of tariffs. This includes diversifying supply chains, investing in domestic manufacturing capabilities, and seeking alternative markets. For example, India is positioning itself as a potential hub for semiconductor manufacturing, aiming to attract companies seeking to reduce reliance on traditional manufacturing centers affected by tariffs. However, such transitions require substantial investment and time, and the effectiveness of these strategies remains to be seen.

India is rapidly emerging as a strategic hub in the global semiconductor ecosystem, at a time when the industry reached a record valuation of USD 656 billion in 2024, reflecting a robust 21% year-on-year growth. This acceleration highlights the rising global demand for advanced chips, driven by AI, mobility, and data-intensive applications. According to a recent report, Nvidia secured the top position among the world’s leading chip suppliers, with its dominant contribution coming from GPUs, CPUs, memory components, and mobile SoCs.

Demand by Geography

Demand by End Use

Economic Impact

Tariffs on semiconductor products have introduced substantial economic disruptions. In the United States, a 25% tariff on semiconductor imports is projected to result in a cumulative loss of $1.4 trillion in GDP over a decade, equating to a 5.1% reduction in economic growth . The immediate effect includes increased production costs for U.S. manufacturers, as they rely heavily on global supply chains for raw materials and components . These heightened costs are often transferred to consumers, leading to higher prices for electronic goods and contributing to inflationary pressures.

Moreover, the uncertainty surrounding trade policies has led to volatility in financial markets and has dampened investor confidence. The private equity sector, for instance, is experiencing challenges in deal-making and asset exits, with a reported $3.6 trillion in unrealized value across approximately 29,000 unsold companies.

Business Impact

Semiconductor companies are facing direct consequences from the tariffs. Advanced Micro Devices (AMD) anticipates a revenue impact of $1.5 billion in 2025 due to new U.S. export restrictions requiring licenses for advanced AI chip shipments to China. Similarly, Qualcomm has forecasted a decline in third-quarter revenue, attributing it to uncertainties surrounding tariffs and weakening demand for smartphone chips.

These challenges are prompting companies to reevaluate their supply chains and consider relocating production facilities to mitigate tariff impacts. Samsung Electronics, for example, is contemplating moving its TV and home appliance production in response to U.S. tariffs . Such strategic shifts aim to maintain competitiveness and ensure continuity in operations amidst the evolving trade landscape.

Geographical Impact

The imposition of tariffs is reshaping global trade dynamics, with countries adjusting their manufacturing and export strategies. India, for instance, is emerging as a potential beneficiary, with increased traction in smartphone manufacturing and considerations by companies like Apple to shift U.S.-bound iPhone production there . This shift is partly driven by relatively lower U.S. tariffs on Indian goods compared to Chinese products.

Conversely, China is experiencing a significant reduction in exports to the U.S., with projections indicating a potential 77% decrease this year . The trade tensions have also exposed China’s dependence on U.S. semiconductors, particularly for automotive applications, prompting efforts to boost domestic chip production.

Key Actions to Consider

• Diversify Supply Chains: Companies should assess their supply chain dependencies and explore diversification strategies to reduce exposure to tariff-related risks. This may involve sourcing materials from multiple countries, investing in regional manufacturing facilities, or developing partnerships with suppliers in tariff-exempt regions.
• Engage in Policy Advocacy: Active engagement with policymakers is crucial to communicate the industry’s concerns and advocate for trade policies that support the semiconductor sector’s growth and stability. Collaborative efforts can help shape policies that consider the industry’s unique challenges and global nature.
• Invest in Domestic Capabilities: Investing in domestic research, development, and manufacturing capabilities can enhance resilience against external trade shocks. Governments and industry stakeholders should collaborate to create conducive environments for such investments, including incentives and infrastructure support.
• Monitor Geopolitical Developments: Staying informed about geopolitical developments and trade negotiations is essential for strategic planning. Companies should establish dedicated teams to monitor policy changes and assess their potential impact on operations.

Conclusion

Tariffs on semiconductor trade are exerting multifaceted impacts on the global economy, business operations, and geographical trade patterns. While some regions may find opportunities amidst the shifting landscape, the overall effect underscores the interconnectedness of global supply chains and the importance of collaborative trade policies to ensure stability and growth in the semiconductor industry.

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