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Rising Costs and Production Delays Coming to the Aerospace and Defense Industry in the Wake of Tariffs

The aerospace and defense industry could see increased production delays and higher costs with rising implementation of tariffs by the Trump administration.

Semiconductors are essential in aerospace and defense operations. Used in many critical systems—from avionics and radar technology to secure communications and missile guidance—semiconductor availability has become a cornerstone of a country’s national security. The need for semiconductors will only increase with the proliferation of artificial intelligence (AI) applications throughout aerospace and defense functions.

The ongoing China-U.S. trade war and President Trump’s tariff policies are becoming increasingly complicated. Recent tariffs and export bans have significantly hampered many original equipment manufacturers (OEMs), contract manufacturers (CMs), and electronics manufacturing services (EMS) providers.

These tariffs, aimed at reducing U.S. reliance on foreign manufacturing, have caused significant disruptions across the global supply chain, with the promise of steeper tariffs on the horizon. As a result, the semiconductor industry is bracing for higher costs, longer lead times, and restricted access to critical components—factors that can ultimately impact national security and operational readiness.

Rising Costs and Extended Lead Times Impact Aerospace and Defense

One of the most immediate and tangible effects of tariffs and export restrictions has been the availability of semiconductor components. Over the last four years, the U.S. and China have passed increasingly stringent regulations on one another. These actions range from restrictions on the sale of graphic processing units (GPUs) to export bans on critical manufacturing materials to specific countries.

New tariffs, starting at 25% with the possibility of increasing, have raised import costs. Manufacturers have had to either absorb these expenses or pass them on to customers. This situation is particularly concerning for the aerospace and defense sector, where semiconductors are specialized, rigorously tested, and often produced in limited volumes. Alternatives are frequently few and far between, especially when it comes to legacy components or chips made with node sizes larger than 28 nanometers.

Since Trump's recent tariff plan was enacted, tariffs on Chinese products, including semiconductor components, have impacted costs. Many aerospace and defense companies source semiconductors from international suppliers, and the new tariffs have forced procurement teams to reexamine preexisting sourcing strategies or pay the higher prices. While domestic semiconductor production is increasing in the U.S., EU, China, and other countries, it is not happening fast enough to avoid these price fluctuations.

Similarly, the industry is already grappling with the increased prices of some raw materials, such as antimony, which saw massive spikes in 2024 after Beijing enacted export restrictions or outright bans. The cost of antimony trioxide more than doubled to over $39,000 per metric ton in 2024 when China partially banned it in August. The price has only increased since the complete restriction, particularly affecting the aerospace and defense industries, in December.

Increased costs are only part of the problem. Due to trade restrictions and supply chain disruptions, lead times for components have also begun to rise. Industries reliant on Chinese supply chains have experienced delays in production and distribution, further complicating procurement for defense contractors.

Aerospace and defense systems often require specialized certification from distributors to utilize components, unlike commercial industries. Even with form-fit-function (FFF) alternatives, replacing an unavailable component is not a simple task. Rigorous testing and stringent premarket approval processes require months, if not years, and millions of dollars before a component can be used in a critical system. Any delay in component availability can create a production bottleneck, delaying the delivery of mission-critical systems.

Beyond the financial and operational challenges, semiconductor tariffs pose a serious risk to national security. The aerospace and defense industry depends on a steady and reliable supply of semiconductors, and the increasing scarcity of these components due to trade restrictions can hinder military readiness and technological advancement.

With limited domestic production of these elements and components, global aerospace and defense companies must seek alternative sources, increasing costs and extending lead times. Semiconductor fabrication requires substantial investment, specialized expertise, and time to scale production. The ongoing labor shortage, even in chip-producing powerhouses like Taiwan, is stalling the opening of these new facilities.

Despite recently announcing a $100 billion investment, TSMC, the largest chip producer worldwide, faced numerous delays in getting its Arizona facilities up and running. Even then, many of the new facilities constructed or planned since the global shortage will produce leading-edge chips, often below 11 nm. Aerospace and defense companies require a significant amount of legacy chips, which many of these new domestic facilities will not produce.

Likewise, educational programs that train the next generation of skilled technicians require time, which the industry lacks due to the ongoing trade war and tariff policies. In the interim, defense contractors may struggle to secure the necessary components, which could impact current and future projects.

What Aerospace and Defense Companies Can Do to Mitigate Risks

With the fluctuating landscape of the semiconductor industry, aerospace and defense companies should start diversifying their suppliers, finding alternative parts with greater multi-source availability, and using case management to plan their next steps effectively. Partnering with domestic semiconductor manufacturers can help create a more resilient supply chain while supporting national initiatives to strengthen local industries.

Diversifying your supply chain through multi-source strategies is crucial. Companies can ensure component availability by working with multiple suppliers, even in the face of trade restrictions and supply chain disruptions. Developing contingency plans and expanding sourcing networks will help mitigate risks associated with over-reliance on a single region.

Given the uncertainty in semiconductor availability and pricing, aerospace and defense companies must implement long-term procurement strategies. This means making sustainable and strategic design choices early in the design phase, such as removing sole sources and components with no alternatives or multiple manufacturers from a product’s bill of materials (BOM). Design engineers for aerospace and defense manufacturers should collaborate with procurement teams to identify parts with greater multi-source availability.

Another key strategy is enhancing demand forecasting through advanced analytics that alert manufacturers to potential risks in their supply chains. By leveraging data-driven insights, companies can anticipate shortages and adjust their procurement strategies accordingly. A proactive approach to inventory management will be essential in navigating the evolving semiconductor landscape.

Finally, partnering with a trusted global electronic component distributor is critical for aerospace and defense companies aiming to secure a stable semiconductor supply. These distributors offer real-time market insights, helping companies anticipate disruptions and adjust procurement strategies. They also provide flexible procurement options, including long-term supply agreements and sourcing for hard-to-find components.

By working closely with trusted distributors, aerospace and defense firms can maintain production continuity, ensure compliance with industry standards, and reduce the risk of counterfeit components. Strong distributor relationships provide a crucial safety net in an increasingly volatile supply chain landscape.

The Future of Semiconductor Supply Chains in a Protectionist Era

The significant impact of semiconductor tariffs on the aerospace and defense industry is undeniable. Increased costs, supply chain disruptions, and component shortages present substantial challenges for OEMs, CMs, and EMS providers. The ongoing trade war between the U.S. and China has added further complexity to an already vulnerable chain in the last few years. With the implementation of tariffs, added strain could derail manufacturers’ operations.

While the industry is adapting, the transition will take time. In the short term, aerospace and defense companies must implement strategic sourcing, invest in procurement resilience, and build strong relationships with trusted electronic component distributors to mitigate risks.

For aerospace and defense companies looking to secure a reliable semiconductor supply, partnering with an experienced electronic component distributor is crucial. Sourceability is that partner. With decades of sourcing experience from our global industry experts and premier market intelligence tool, Datalynq, Sourceability can help aerospace and defense manufacturers locate hard-to-find components despite geopolitical disruptions.

Sourceability is AS6081 certified, adhering to the guidelines to mitigate the risk of counterfeit components within high-reliability supply chains, specifically aerospace. With its rigorous ISO 9001-certified quality management system and 3-year warranty, Sourceability aims to support aerospace and defense OEMs, CMs, and EMS providers with transparency and reliability during this period of unpredictability.

Contact us today to learn how we can help mitigate risks and ensure a steady flow of high-quality components for your critical applications.

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Sourceability Team
The Sourceability Team is a group of writers, engineers, and industry experts with decades of experience within the electronic component industry from design to distribution.
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