Copper tariffs put the chip supply chain under pressure

The chip industry’s momentum is colliding with climate and trade challenges, and a new tariff on copper might derail everything.

The semiconductor industry is celebrating record-breaking chip sales this summer driven by strong regional gains and demand across multiple segments. Meanwhile, U.S. investments in advanced R&D and the opening of NSTC signal the start of a new era of domestic innovation and industrial renewal.  

Even so, this momentum is unfolding against the backdrop of raw material disruptions. New reports claim over half of all copper production will be at risk due to climate-related drought by 2050 without intervention. At the same time, the Trump administration’s move to introduce a new 50% tariff on copper imports has sparked higher prices that will ripple down the supply chain.  

Semiconductor industry rebounds and innovates

After watching its market share fall for three decades, the American semiconductor industry is roaring back, a trend echoing the broader market according to the Semiconductor Industry Association’s (SIA) State-of-the-Industry Report 2025. In May, worldwide chip sales surged to $59 billion, up 27% year-over-year and 3.5% compared to April.  

Gains were present in every region, with the Americas leading the way with a staggering 45.2% increase in chip sales. Asia Pacific followed with 30.5% and China was near at 20.5%. Europe saw a more modest gain of just 4.1%, reflective of its persistent underinvestment in advanced node capabilities and chip innovation relative to global peers.  

The overperformance in the U.S. is directly tied to expanded domestic production capacity and significant public investment through the CHIPS and Science Act. Meanwhile, China’s gains—though slower than in previous growth cycles—indicate a stabilization following several years of tech restrictions and trade pressures.

Driving the latest chip sector rebound are several high-growth verticals, including automotive, communications infrastructure, and internet of things (IoT) applications. These sectors are becoming more interlinked with artificial intelligence (AI) and edge computing by the day, creating a compounding demand for specialized chips with advanced process nodes and higher performance-per-watt efficiency. Automotive applications, especially advanced driver assist systems (ADAS) and electric vehicles (EVs), are pushing demand for high-reliability chips and power semiconductors.  

However, private sector buying isn’t the only influence on the industry’s growth. Generational investments by the U.S. government have sparked a massive resurgence in chip innovation. The latest reflection is the launch of the National Semiconductor Technology Center (NSTC) in Albany, New York.  

This $825 million R&D facility, located at Albany NanoTech, represents one of the first physical manifestations of the CHIPS Act’s vision to reposition the U.S. at the forefront of semiconductor innovation.  

The NSTC’s core mission is research on extreme ultraviolet (EUV) lithography. U.S. competitiveness has historically lagged in this arena compared to counterparts in Asia and the Netherland’s ASML. By combining government support with innovation coming from both academia and private industry, the NSTC aims to reduce the domestic industry’s reliance on foreign fabs and reestablish the U.S. as a hub for advanced node development. The center will also create a pipeline of new high-quality engineering and R&D jobs to close the gap in chip talent.  

These developments promise increased chip availability and closer integration between R&D and volume production. However, the advantages won’t be equally distributed. Firms that fail to align their sourcing strategies with the industry’s latest shifts risk being left behind.  

At Sourceability, our global network of semiconductor experts and inventory management can help you secure critical components, expedite lead times, and forge strategic partnerships to ensure you benefit from America’s renewed innovation. Whether you need to secure advanced process node components for AI buildouts or legacy components for industrial applications, we can help you capitalize on the latest trends without exposing your operations to unnecessary risk or disruption.  

Climate disruption and tariffs threaten supply

Even as semiconductor sales are rebounding, the supply chain faces another concerning test. Climate-driven drought hampering copper production and a new proposed 50% tariff on copper imports both pose significant risks to the semiconductor industry, one of many that relies on the vital mineral.  

Copper’s role in semiconductor fabrication cannot be understated. It is used in interconnects, advanced packaging, and power delivery, among other applications. According to the latest climate impact report from PwC, some 32% of the copper used in chipmaking is being sourced from regions highly vulnerable to drought—primarily Chile.  

That figure is projected to rise to 58% by 2050 unless global emissions targets are met. As droughts intensify in South America, especially Chile and Peru, which combine for nearly 40% of global copper production, industries reliant on copper will face increasing supply volatility and costs.  

In response, some leading firms have begun investing in water security initiatives, such as desalination plans and closed-loop recycling systems. Others are accelerating research into alternative methods of securing the supply chain, including diversification, material innovation, and efficiency improvements. However, these initiatives take time and capital. The interim reality is that climate change puts the world’s copper supply at risk.  

Compounding this pressure is President Trump’s decision to announce a new 50% tariff on copper imports. The new duty is set to take effect on August 1, 2025. Positioned as a measure to revive U.S. copper mining and refining, the announcement’s immediate impact has been a sharp hike in copper prices. Following the move, copper prices surged 13% to new record highs.  

Those costs will inevitably be passed on to consumers of the many goods in which copper is an essential input. Electric vehicles, appliances, air conditioners, and devices built with semiconductors will all wear higher price tags should the tariff go into effect. Of course, the recent announcement may be simply another negotiating tactic as the Trump administration seeks cooperation and concessions from various trade partners.  

For now, some firms may benefit from reshoring opportunities or increased U.S. copper mining activity. But the wider short-term fallout is inflation for both copper prices and the cost of manufacturing goods with it.  

The chip sector, already facing a host of manufacturing challenges and geopolitical turmoil, now must compensate for yet another variable. As chipmakers navigate drought-prone mining regions and escalating tariffs, the industry continues to move toward multi-regional sourcing and collaborative supplier ecosystems to offset the burden. In the coming days, these trends will define not just semiconductor production, but the global supply chain that relies on them.  

Sourceability understands that climate and trade risks rarely move in isolation but hit hardest when companies are unprepared. Our diversified sourcing strategy and access to a network of vetted suppliers can help buyers mitigate these raw-material risks and stabilize production pipelines even as key inputs face massive disruption.