Matt Lekstutis, consulting director for North America with Efficio Consulting, details the near- and long-term effects of the Trump tariffs on the semiconductor industry. 

The immediate impacts of the tariffs on semiconductor supply chains have been “fairly dramatic,” Lekstutis says. Companies are facing issues of higher cost and logistical problems resulting from the industry’s high concentration of supply. 

In response, they’ve had to explore near-term strategies such as forward-buying of product, negotiating with existing suppliers to mitigate risk, and making changes in final assembly wherever possible. What’s going on within the sector, Lekstutis says, is a “restructuring that’s just going to continue to accelerate.” 

Lekstutis anticipates cost increases of between 5% and 20% in semiconductor supply chains as a result of the tariffs. Those higher costs are likely to be passed along, ending with the ultimate consumer paying the bill.

Chipmakers are already taking steps to diversify their supply chains and lessen reliance on manufacturing powerhouses such as China and Taiwan. But that’s a long-term play that will take many years and cost billions of dollars to execute. In the meantime, the semiconductor industry will have to deal with the consequences of having concentrated chip production in so few locations around the world.

The shift in sourcing strategies has been underway for some time, driven by legislation such as the Biden Administration’s CHIPS and Science Act, and the initial round of tariffs imposed by President Trump in his first term. Ultimately, Lekstutis says, it will result in “a more resilient, localized supply chain.” And the U.S. is well-positioned to take advantage of the shift. No other country has the entrepreneurial spirit and innovative capabilities necessary to play a major role in the global semiconductor supply chain in the years ahead, he says.