»If you increase the cost of trading, you will get less trading«

It went almost as usual for dealmaker Trump. First, on 7 August this year, the US President threatened to impose protective tariffs of 100 per cent on imported semiconductors, then he gradually backed down from this threat. The fact is that semiconductors exported from Europe to the US are currently still exempt from reciprocal tariffs, but that could change. The current situation could be just a kind of postponement for decisions that are likely to be communicated in the coming weeks. 

But before looking to the future, let’s take another look back at the situation in August. Donald Trump wants to use massive import tariffs to ensure that semiconductor manufacturing returns to the United States. As a reminder, 35 years ago, the US manufactured around 40 percent of the world’s semiconductor requirements. Trump wants to return to this former greatness. Only those foreign manufacturers who already produce in the US or commit to doing so in the future should be exempt from these tariffs. Companies that have already committed to this include TSMC, Samsung, Intel, IT, Micron, Applied Materials and Nvidia. 

Thomas Grasshoff, Head of Strategy at Semikron Danfoss, does not believe that import duties on semiconductors from Europe to the US will actually be imposed: »I don’t think that will happen so quickly because the US imports at least 25 per cent of the semiconductors it needs, and in the case of power semiconductors, the figure is even more than 90 per cent!« However, he believes that company-specific rules could also be introduced, for example, in the form of only allowing companies that invest in the US to import duty-free into the country.

The results of the investigation by the US Department of Commerce, or more precisely the Bureau of Industry and Security, as part of the Section 232 investigation ‘The Effect of Imports on National Security’ will likely be decisive for the future. These committee investigations began on 14 April. The results of the investigation are to be published after 270 days. That would be in mid-January 2026. There is the possibility of extending the deadline by 30 days, which would mean publication of the results in mid-February. 

Until then, according to industry estimates, European semiconductor manufacturers are likely to hold back on statements and investments. If the investigation concludes that import tariffs are necessary to protect national security in this area, boardrooms are likely to begin weighing up whether it is really necessary, strategically and in the long term, to maintain or build factories in the US. 

The example of Infineon Technologies from August shows how cautious companies are being in their statements: »We cannot speculate on possible semiconductor tariffs and the latest announcement by the US government in this regard, as no details have been published at this stage.« This is unlikely to have changed since then. Infineon is still in a relatively good position. Although the company sold its 200 mm plant in Austin, Texas, to Sky Water Technology this year, it has signed a long-term supply agreement with the manufacturing service provider. And Infineon still has its own manufacturing facilities in the US, at least, with the Cypress Semiconductor plants in San Jose, California, and Round Rock, Texas, even if they are not power semiconductor manufacturing facilities. 

NXP is similarly well positioned, with two manufacturing facilities in Austin, Texas, and two in Chandler, Arizona. The situation is different for STMicroelectronics, which no longer has its own plants in the United States. The case of Bosch shows how things could turn out in the event of tariffs. Bosch already purchased the TSI Semiconductors plant in Roseville, California, in April 2023 and will manufacture SiC power semiconductors there in the future. 

If all goes well, European semiconductor manufacturers will probably be able to continue serving their US customers as before. If the worst-case scenario occurs and the Section 232 investigation concludes that import duties on European semiconductor imports are necessary to protect national security, this is likely to pose a challenge for listed companies. Depending on the technology, the construction of new fabs is likely to cost in the single-digit to double-digit billion dollar range. Once these fabs are up and running, they will also need to be utilised to full capacity. The fact that Trump’s tariff policy does not distinguish between domestic and international manufacturers is evident from the fact that companies such as Intel, TI, Micron and Nvidia felt compelled to quickly make investment commitments in the United States. The example of EPC shows how this looks from the perspective of an American company that manufactures its chips in Taiwan. As co-founder and CEO Dr Alex Lidow reports, the tariffs have »both caused financial harm and caused uncertainty in our business. In addition, they have caused our Chinese customers to aggressively look for local alternatives, even if they are of inferior quality or performance. Our business in China has been cut in half«!

»Is this worse than expected«? From his point of view, no: »I think this was entirely predictable. If you increase the cost of trading, you will get less trading. What is frustrating is the addition of uncertainty due to the on-again, off-again threats of tariffs, particularly on semiconductors.« »Some may claim that it is short-term pain for long-term gain,« says Dr Lidow, »but I have not found any historical precedent that supports this idea.« He is also concerned about the United States as a technology hub: » The US is losing talent due to the H1-B visa changes, losing the ability to train talent through the reduced funding of institutions such as NSF and NIH, as well as premiere technical universities and is losing our ability to compete due to increased costs of raw materials and reduced access to talent«. 

From the perspective of Callum Middleton, Principal Analyst, Power Semiconductor at Omdia, the impact of protective tariffs on the power semiconductor industry has been limited so far: »The scale of trade in power semiconductors in both directions between China and the US is limited, and we do not expect this to change. Chinese companies are much more focused on their domestic market and will look to increase exports to the EU and Japan.« »For US companies,« says Middleton, »the domestic market will remain key, but the current tariff levels will limit their chance to take advantage of the Chinese EV industry.«

However, the analyst believes that the impact of import tariffs on individual end markets is massive: »Such as how US policies impact key areas such as renewable energies and EVs. The current administration does not look on these favourably, which will limit potential upside for power semiconductors. However, this trend has not spread to the rest of the world, where EVs are experiencing a resurgence after a difficult 2024, and renewable energy installations continue to grow thanks to exports of panels and batteries from China.« 

The preliminary conclusion of the Omdia analyst on the impact of US protective tariffs on the power semiconductor industry is quite clear: »The relatively small size of the US market limits the impact on power semiconductors. Outside the US, the world keeps turning.« eg