How U.S. Tariff Proposals and AI Demand Are Reshaping the Semiconductor Landscape

The global semiconductor landscape is being shaped by two titanic forces: geopolitical realignment spearheaded by U.S. tariffs and surging demand for AI components. As the Trump administration considers new levies to promote domestic chip manufacturing, industry leaders warn of unintended consequences disrupting a globalized supply chain.  

At the same time, fiscal Q3 results from Lam Research highlight the continued explosive growth of AI chip demand, reinforcing the need for advanced manufacturing capabilities and agile procurement strategies.  

How a Chip Tariff Might Look on the Semiconductor Industry

As the Trump administration weighs a new wave of semiconductor tariffs, the industry braces itself for the fallout. While the U.S. political narrative centers on reshoring production and limiting China’s access to advanced chips, structural realities of the semiconductor supply chain make imposing effective tariffs a logistical headache. Meanwhile, industry players warn the trade rules could do more harm than good, leading to higher costs, more administrative complexity, and minimal reshoring in the short term.  

The globalized nature of chip manufacturing is at the heart of the debate. Even chips designed by U.S. firms often rely on offshore assembly, testing, and packaging—not to mention the raw materials needed to make them.  

Domestically, roughly 60% of the chemicals needed to make advanced semiconductors have insufficient supply. Most of these inputs are sourced from suppliers in Europe and Asia. Meanwhile, the U.S. is 100% reliant on imports for over a dozen minerals that are indispensable for chip manufacturing.  

Given these deficiencies, countries like Taiwan, South Korea, the Netherlands, and Malaysia play critical roles in the U.S. chip supply chain. Imposing blanket tariffs on imported semiconductors targeting these nations and others would raise prices for these essential imports, thus harming American companies just as much as foreign rivals.  

Downstream, Trump’s proposed semiconductor tariffs will undoubtedly raise production costs for everything from smartphones to electric vehicles. Given the administration’s track record of tariffs to date, duties aimed specifically at semiconductors threaten to be a blunt instrument in a supply chain that demands surgical precision.  

One alternative under consideration is a “component tariff” structure that would tax the embedded value of foreign-made chips within finished devices. However, as highlighted by the Financial Times, such a model would face steep logistical hurdles. Parsing the origin and value of semiconductors inside assembled goods would demand not only an overhaul of customs procedures but also add a new layer of complexity to global compliance frameworks already under massive strain.  

Targeted tariffs on Chinese semiconductors are easier to implement, but risk having a limited effect because these chips account for a relatively small share of high-end silicon imported by U.S. firms. A 2024 U.S. Census Bureau report gave China a mere 3% share of U.S. chip imports, primarily as components in finished electronic devices. Meanwhile, a combined 64% of semiconductor imports come from Taiwan, Malaysia, Thailand, and Vietnam.  

Experts suggest a wiser approach would be to focus on curbing Chinese semiconductor subsides while simultaneously investing in domestic talent and infrastructure. Forming new international trade agreements could also strengthen and diversify the semiconductor supply chain away from China without putting the broader chip economy at risk.  

Amid the current landscape of uncertainty, companies are increasingly seeking resilient sourcing strategies. Sourceability helps mitigate tariff-related risks by connecting businesses to a diverse, transparent network of global suppliers, ensuring access even when traditional pipelines face disruption. Meanwhile, Datalynq helps procurement leaders gain visibility into component availability, pricing, and lead time forecasts so they can navigate unstable policy environments.

In the near term, tariff discussions are sure to keep the chip sector on its toes. However, if broad rules are levied against international chips, industry players should expect realigned cost dynamics across the electronics sector.  

Lam Research – AI Demand Continues to Grow

The latest earnings report from Lam Research, a leading supplier of advanced chipmaking equipment, is a strong indicator of where the semiconductor industry is heading. Its fiscal Q3 revenue hit $4.72 billion, surpassing expectations of $4.65 billion. Lam’s performance highlights how surging demand for AI chips is reshaping the foundry and equipment ecosystem.  

Driving the overachieving Q3 numbers is an uptick in orders from key customers, including TSMC. The Taiwanese chipmaker is ramping up production to serve the needs of its customers, who remain hungry for AI processing power. As next-gen AI models become increasingly compute-intensive, fabs are turning to Lam’s advanced wafer fabrication and interconnect solutions to meet demand for high throughput, high-density chip architectures. The company’s tools are critical for etching, deposition, and wiring in 3nm and below nodes.  

Notably, Lam’s Q3 growth comes despite headwinds from ongoing U.S. export restrictions and rising trade tensions. China and Taiwan accounted for a combined 55% of the firm’s quarterly revenue, underscoring the fact that Asia continues to be the driving force in the semiconductor value chain despite Washington pushing for domestic capacity expansion.  

Looking ahead, Lam projects fiscal Q4 revenue between $4.7 and $5.3 billion. It also eyes a long-term revenue goal of $25 to $28 billion by 2028.  

For procurement leaders, Lam’s momentum signals a tightening supply environment for AI-enabling components and tools. Sourceability can help companies respond with a robust sourcing strategy grounded in predictive analytics to secure access to high-demand components and mitigate risk through supplier diversification.

While the U.S. hopes tariffs will encourage domestic manufacturing, they may inadvertently throw global supply chains into upheaval. Even so, the AI boom is clearly still the dominant force in the chip sector. Amid unprecedented demand for advanced semiconductors, procurement leaders must focus their strategy on building a resilient, adaptable supply network to remain competitive.