Semiconductors Next in Line: What Trump’s Tariff Shift Means for Global Chipmakers

Global chipmakers are bracing for another geopolitical tremor, and this time, the ripple effects might be more significant than the last. In our view, former US President Donald Trump’s proposed tariff shift signals a renewed phase of economic nationalism, and the semiconductor industry could soon find itself squarely in the crosshairs. This is not merely about upsetting supply chains or tweaking trade policy. It’s about economic strategy, technological dominance, and national security rolled into one.

We’re not talking about taxing shoes or steel anymore. We’re talking about microchips—the silicon brainpower behind everything from smartphones and electric vehicles to satellites and missile defence systems. If Trump’s mooted plan goes ahead, we’re likely to see a fundamental reconfiguration of who makes the world’s chips, where they are made, and for whom they are made.

 

Why Semiconductors Are More Than Just Silicon

The semiconductor industry isn’t just another sector. It’s the beating heart of the global economy. As the world becomes increasingly digitised, semiconductors have become essential to the functioning of nearly every modern device and service. According to data from the Semiconductor Industry Association (SIA), worldwide chip sales totalled around USD 574 billion in 2022, highlighting the central role semiconductors play in powering everything from cloud computing to medical diagnostics.

What makes semiconductors unique is their role in both the consumer and defence industries. They are just as crucial to your smartphone as they are to the F-35 fighter jet. This dual-use nature has elevated them from a commercial asset to a strategic one. In recent years, this realisation has prompted countries to start treating chips not just as commodities, but as national priorities. The semiconductor race is now a matter of economic survival and security dominance.

 

Trump’s Tariff Shift Explained: What’s at Stake?

Donald Trump’s proposed tariff framework is being pitched as a broad, no-nonsense attempt to level the playing field for American industry. But beneath that political packaging is a clear message: reduce reliance on China, especially in high-tech sectors like semiconductors. President Trump imposed a 10% universal tariff on many imports, with exemptions for certain electronics, including smartphones, laptops, memory cards, semiconductors, and solar cells, amid efforts to protect America’s national security. It is designed to curb offshoring, along with a more targeted 60% tariff on Chinese imports, which would, in effect, price many Chinese goods, including chips and electronics, out of the US market entirely.

This tariff strategy is part of a larger push to decouple technologically from China, building upon Trump’s earlier trade war in 2018-2019. However, this time around, the target is more precise and more strategic. Instead of just focusing on reducing trade deficits, this move is intended to weaken China’s ambitions in next-generation technologies, such as artificial intelligence, advanced semiconductors, and 5G communications.

Export controls on advanced chipmaking tools and restrictions on sales of high-end chips to Chinese firms have already taken their toll. Trump’s new tariff agenda, if enacted, could drive a wedge right through the centre of global tech supply chains, raising costs, delaying projects, and forcing companies to rethink their geographic exposure.

 

Which Chipmakers Could Gain—and Which Might Falter

We believe Trump’s tariff shift could create a stark divide between winners and losers in the global semiconductor sector. Companies that are geographically aligned with the US or have diversified supply chains may find themselves in an enviable position. On the other hand, firms that rely heavily on Chinese manufacturing, tooling, or customers may face an uphill battle.

Take Intel, for instance. With its aggressive US expansion plans, including new fabs in Ohio and Arizona, Intel is well-placed to capitalise on reshoring incentives and government subsidies stemming from the CHIPS and Science Act. In contrast, Chinese firms like SMIC, already hampered by export bans on EUV lithography equipment, may find themselves even more isolated.

It’s not just chipmakers that stand to benefit or lose. Companies like Apple, whose products are heavily reliant on Chinese assembly lines, could see production costs spike dramatically. Even though Apple designs its chips through its Silicon division, the reliance on Taiwanese and Chinese facilities for manufacturing and final assembly makes it highly vulnerable to any large-scale tariff implementation.

Meanwhile, TSMC, Taiwan’s chip giant, could find itself both favoured and threatened. While its Arizona fab projects suggest it is taking de-risking seriously, TSMC also serves a large Chinese client base, including companies that may be hit with export restrictions. That dual exposure could put it in a difficult balancing act between the world’s two biggest economies.

 

Reshaping the Supply Chain: What Happens If China is Cut Out?

A key consequence of the proposed tariff shift is the forced diversification of supply chains. For years, China has been the go-to location for everything from chip packaging to final device assembly. However, if Trump’s tariffs become reality, multinational tech firms may look to relocate their operations elsewhere. The search for alternative manufacturing hubs is already underway, with Vietnam, India, Malaysia, and even Mexico competing to replace China as a cost-effective, geopolitically neutral production base.

Vietnam, for instance, has become a hotspot for semiconductor backend processes, attracting massive investments from the likes of Samsung and Intel. India, too, has upped its game, announcing a USD 10 billion incentive programme to lure global chipmakers and manufacturers. Malaysia, a long-time player in chip testing and packaging, is seeing a renaissance as companies seek out reliable partners in Southeast Asia.

Despite rising costs, the US remains committed to rebuilding its semiconductor capacity. The CHIPS Act is pumping billions into new fabs and R&D initiatives. But as we know, building semiconductor fabs is not like flipping a switch. It can take three to five years to get a Fab fully operational. In the meantime, we may see increased supply tightness and longer lead times for critical components.

 

What Does This Mean for Investors?

From an investment perspective, the implications are wide-reaching. Investors need to be more discerning than ever. We’re not suggesting you divest from every company with Chinese exposure, but it’s becoming increasingly important to scrutinise geographic risk and supply chain concentration. Stocks that are directly tied to Chinese production or reliant on Chinese markets could experience significant valuation headwinds.

On the other hand, companies aligned with reshoring or “friendshoring” initiatives may see positive momentum. Firms like GlobalFoundries, which are investing in US-based fabrication capacity, or ASML, which sits at the epicentre of chip production tooling, may experience renewed investor confidence, albeit with some caveats around export restrictions to China.

Even for those focused on the Australian market, there are niche opportunities to consider. Companies such as BrainChip Holdings, which specialise in neuromorphic computing, could see a spike in interest due to their independence from traditional fabrication bottlenecks. And for those not ready to pick individual winners, ETFS such as BetaShares’ RBTZ provide broad exposure to the global robotics and semiconductor industry, balancing the risks of individual companies with diversified thematic coverage.

 

Australia’s Place in the Semiconductor World

While Australia may not be home to any major chip fabs, we’re not sitting on the sidelines entirely. In our view, Australia has a chance to carve out a niche in the global semiconductor value chain, particularly in research, quantum computing, and materials technology.

One example is Silex Systems, an ASX-listed firm working on enrichment technologies that have applications in advanced computing and nuclear medicine. Additionally, Australia’s universities and research institutes are involved in pioneering work in quantum computing, an area that could leapfrog traditional semiconductor architectures altogether.

The Australian Government’s National Reconstruction Fund includes a mandate to support emerging technologies, including microelectronics. While the scale may be small compared to the US or China, strategic investment today could ensure Australia plays a meaningful role in tomorrow’s tech ecosystem.

 

Are We Headed Toward a Tech Cold War?

Let’s not mince words: this is bigger than a trade spat. We believe we are entering a new era of technological bifurcation, one in which the semiconductor industry will increasingly split along geopolitical lines. The implications stretch beyond economics into ideology, power projection, and the shaping of global norms.

What’s unfolding is not merely a tariff war, but a slow-motion decoupling. On one side, the US and its allies are focused on securing supply chains, enhancing local production, and controlling critical technologies. On the other hand, China is doubling down on self-sufficiency through massive subsidies, local champions like Huawei, and ambitious initiatives like “Made in China 2025.”

This split could create parallel chip ecosystems, with different standards, designs, and dependencies. For global firms, this may require dual compliance, duplicated supply chains, and higher operating costs. For investors, it means volatility, but also opportunity. Markets tend to overreact in the short term, but long-term winners will be those that can adapt, hedge their risks, and innovate within the new world order.

 

Conclusion: Strategy Over Sentiment

Trump’s proposed tariff shift signals more than a trade dispute; it points to a broader, long-term restructuring of the global tech landscape. Semiconductors have become strategic assets, and the push for supply chain diversification, national resilience, and technological independence is gathering pace.

In our view, this isn’t a temporary disruption but a permanent shift. Chipmakers that can realign geographically and strategically may thrive, while those heavily tied to China could face mounting pressure. For investors, the challenge lies in looking beyond immediate market reactions and understanding the deeper structural changes at play.

Australian investors, in particular, have an opportunity to back innovation-led firms and diversify into reshoring and AI-adjacent sectors. The key is not to follow sentiment, but to act strategically. This new phase in semiconductor geopolitics is already underway, and how we respond now will shape the investment landscape for years to come.

 

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FAQs

• How might the semiconductor market respond if Trump’s tariffs are enacted?

  The global semiconductor market could see price increases, supply chain reconfigurations, and delays in production as firms adapt to new tariff structures. Short-term volatility is expected, especially among China-reliant companies.

• Which Australian firms are connected to the semiconductor industry?

  While Australia lacks major chip manufacturers, firms like Silex Systems and BrainChip Holdings operate within adjacent technologies. These companies could benefit from global shifts in semiconductor priorities, especially in AI and quantum computing.

• What are the investment risks if chipmakers shift production out of China?

  Production shifts may lead to increased costs, regulatory complexity, and longer lead times. However, companies that manage this transition well could secure long-term strategic advantages and potentially higher margins.

• Could reshoring production cause a new chip shortage?

  Yes, at least temporarily. Building new fabrication plants takes years, and shifting supply chains often introduces unforeseen bottlenecks. In the short term, scarcity of certain chip types is possible.

• How should investors in Australia respond to these global developments?

  Australian investors should review their portfolio’s exposure to US-China trade risk, focus on diversification, and consider thematic ETFs or companies tied to reshoring, innovation, or critical tech independence.