In current events following the implementation of Trump’s trade policies, the semiconductor industry is facing challenges because of disruption in the supply chain, increased operational costs, export restrictions, and geopolitical tensions.
Economic and Market Repercussions
The first point of impact was the stock market, which had a tremendous impact on two of the biggest semiconductor rivals in the market, Nvidia and AMD (Advanced Micro Devices Inc.), both tumbling over 6% in early trading on April 16th.
Nvidia has estimated a $5.5 billion loss in its first quarter after being informed on April 9th of export license requirements due to the trade policy, which stands to limit the chances of the H20 chip (specifically made for the Chinese market) being utilized by the Chinese.
AMD, on the other hand, anticipates an $800 million charge in exporting its M1308 chip, which is specifically designed for AI workloads and high-performance computing tasks, to China, which represents its second-largest market, generating $6.23 billion (24% of total sales) in revenue in 2024.
As a result of the trade policy, Nvidia’s H20, AMD’s M1308, and other chipmakers like Micron, Arm, and Broadcom, among others, are also required to request export licenses before trading with Chinese firms, which dropped stock prices between 2.5% and 4.6%.
ASML, a Dutch multinational corporation and one of the world’s leading manufacturers of chip-making equipment, warned about the impact the tariff would have on the company’s outlook in 2025 and 2026.
Before the tariff announcement, ASML CEO Christophe Fouquet’s conversations with customers supported ASML’s expectations of 2025 and 2026 being growth years. But following the announcement, he said in a quarterly earnings statement, “The recent tariff announcements have increased uncertainty in the macro environment.”
Supply Chain and Geopolitical Tension
Semiconductors/microchips are fundamental components in a vast array of everyday and advanced technologies, ranging from consumer electronics, internet infrastructure and telecommunications, healthcare technology, the automotive industry, solar cells, smart grids, and other applications.
The chip is designed in the U.S., manufactured in Taiwan, Japan, or South Korea, and the raw material (germanium and gallium) for production is obtained from China. It is then sent to countries like China and Malaysia for testing before use.
Nvidia and AMD chips are primarily manufactured at Taiwan Semiconductor Manufacturing Co. (TSMC) in Taiwan and its facility in Arizona. However, Taiwan remains the primary location for chip production.
China and the US over the years have been making attempts to reduce their shared economic interdependence and potentially harm the other’s economy, which has led to the ongoing trade war. However, both countries heavily depend on Taiwan for semiconductors, which has caused them to view Taiwan’s dominance as a national security risk.
To reduce their reliance on Taiwan, China and the US are taking different strategic paths. The US decided to make use of trade policy by adding more tariffs and implementing the need for export licenses on semiconductors.
China, on the other hand, implemented a new guideline where advanced chips that are designed by American companies but manufactured in Taiwan will be exempt from China’s tariffs on US goods.
Unlike the usual tradition adopted by the US and other countries that consider the country of origin for chips to be where the final assembly and packaging occur, China will consider the location where the most complex and value-added part of manufacturing (etching of the circuits onto the silicon wafer) takes place.
Lita Shon-Roy, founder and CEO of TECHCET, said, “If the two largest economies in the world cannot come to an agreement, they will both drag each other down.”
The production process for semiconductors is one of global interconnectedness, which is expensive and technologically complex. Trump’s trade policy, however, is one that is driven by the need to have industries responsible for the entire production stage built in the US through the threats of tariffs, which can disrupt supply chains and exponentially increase production costs .
