On 11 April, the global semiconductor industry welcomed clarification on tariff exemptions to US imports in an amendment to President Trump’s Liberation Day (2 April) tariff announcements. But Trump has since signalled that this exemption may be short-lived with further tariff announcements on the way, while hinting at exemptions for certain companies.

“I’ll give you that answer on Monday,” Trump told reporters aboard Air Force One on Saturday (12 April) referring to further clarity on semiconductor tariffs. Seeking to explain his rationale, he told reporters: “We wanted to uncomplicate it from a lot of other companies, because we want to make our chips and semiconductors and other things in our country.”

The semiconductor industry’s strategic importance in the ongoing US China tech war and on national security issues saw the Biden administration implement the US CHIPS Act, an ambitious policy to attract foreign chip makers and strengthen domestic chip manufacturing capacity. While the Trump administration appears to be pursuing the same agenda of onshoring chip manufacturing, one of its first governing moves was to repeal Biden’s CHIPS Act.

On Friday’s (11 April) Silicon Valley venture capitalist All In podcast, discussing US dependence on Chinese manufactured chips where some 95% of advanced chips are produced, US economist and former US Treasury Secretary, Larry Summers, said: “If I was worried about dependence and strategic [and all that], the last policy I would have wanted to abolish was the CHIPS Act. That’s the largest, boldest thing the US has done to avoid dependence in a national security area and the Trump administration has killed all that.”

Amid the flurry of policy moves, Trump’s 11 April tariff executive order clarification also announced exclusions on “Low-Value Imports from the People’s Republic of China”, namely electronic devices such as smartphones and computers imported from China, which are wholly dependent on semiconductors in their manufacturing.

US manufactured chips exported to Asia for assembly into electronic devices present a tariff conundrum for the Trump administration, highlighting the extent to which global supply chains are irrevocably interconnected. Subjecting tariffs on Asian assembled devices imported back to the US essentially amounts to tariffing home-grown chips.

Aside from the gargantuan task of decoupling US China supply chains, Trump’s reversal of tariffs on smartphones and computers has weakened the administration’s negotiating credibility. In a bid to save face, the President posted on Truth Social insisting that electronics made in China will not be exempt from tariffs and are simply moving into a different “tariff bucket”.

In the same post, Trump announced a national security trade probe into the semiconductor sector: “We are taking a look at Semiconductors and the WHOLE ELECTRONICS SUPPLY CHAIN in the upcoming National Security Tariff Investigations.”

Semiconductor tariffs will hamper AI development

GlobalData chief analyst and practice lead Rena Bhattacharyya says that President Trump’s semiconductor exemption was driven largely because being a leader in advanced and emerging technologies, such as artificial intelligence, is widely considered critical to US national security interests.

“Without access to processing power, the US would be at risk of losing its edge and falling behind other countries, such as China. The wrinkle in Trump’s plan, however, is that semiconductors used for AI processing are often embedded in other hardware, and the impact of tariffs on that hardware is, as yet, unclear,” she says.

From an enterprise perspective, an exemption on high-end chips is critical, particularly those developing AI. However, the White House list of products that are exempt from tariffs does not include GPUs and servers for training AI models, notes Bhattacharyya.

Furthermore, equipment that is imported and used to produce chips is not exempt from tariffs either. “It remains to be seen what chip-related components will be affected by the tariffs. For US enterprises, if processing hardware is not excluded from tariffs, AI training and inference will become more expensive,” she says.

The chaotic implementation of US import tariffs since 2 April means that any future exemptions hold no guarantee of stability for the industry’s intricately connected global supply chains. Device manufacturers are reacting by stockpiling existing inventory of devices, semiconductors, and AI components to sustain pricing, demand, and revenue levels in the short term.

Companies are stockpiling semiconductors

GlobalData Strategic Intelligence’s Tariffs and Trade Wars Executive Briefing (First Edition) notes that despite the initial exemptions, looming tariffs will worsen revenue uncertainty amidst supply shortages due to current stockpiling.

“Ongoing uncertainty around tariff levels, the exemption scope, and global recession fears could put major OEM production improvement projects on hold, similarly impacting revenue estimations,” notes the report.

Apple currently stands to be more severely impacted by the tariff imposition than competitors Samsung or Google, due to Apple’s heavier reliance on China for its supply chain. However, the report predicts that Apple may be in line for a tariff exemption—which would change its impact level. Indeed, Trump hinted on 13 April at certain companies being exempt from planned tariffs.

However, the report predicts that even if Apple wins a tariff exception, the company will go back to its supply chain drawing board. Yet another demonstration of what might become a wholesale restructuring of global technology supply chains.

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