Semiconductor tariffs and China’s growing influence in global markets – March 7, 2025
Every new week of 2025 brings about uncertainty and change that promises to rebuild the global semiconductor supply chain. US President Trump spent most of his first few weeks in the office, making a major move to achieve his “America-first” trade policy. These moves have raised concern among businesses and end users. This is because tariffs can affect consumers suffering from high prices.
The US is considering imposing new tariffs, and China is moving forward with semiconductor production, particularly memory technologies such as DRAM and NAND. According to a new report by Chosun Biz published in the Korea Institute for Science and Technology Evaluation (KISTEP), China’s semiconductor industry is rapidly surpassing South Korea in its basic capabilities in all technical fields.
The impact of US tariffs on semiconductor supply chains
Since Trump launched his second term, tariffs have been a hot topic in US trade policy. Over the past few weeks, Trump has considered passing tariffs in China, Canada, Mexico, Taiwan and the EU. Amidst rising tensions recently, Trump has proposed widening the scope of US tariffs to include automobiles, medicines and semiconductors.
Trump told reporters that tariffs are probably around 25%, “it’s effectively higher on a one-year course.” These proposed tariffs could begin as early as April 2nd.
The aggressive addition is an expansion of tariffs of 25% on steel and aluminum imports, scheduled to take effect in March. Trump said the previous tariffs were in operation and indicate that future tariffs are likely to be implemented.
“I’ve been contacted by some of the world’s biggest companies. They want to return to the US through what we’re doing economically and through tariffs and incentives,” he said.
“When they’re back in the US and they have their plants and factories here, there’s no tariffs,” Trump added. “So we want to give them a little chance.”
Ophelia Chan, senior business fundamentals analyst at GlobalData, shares that these tariffs “will raise drug prices for US patients, exacerbate drug supply shortages and encourage manufacturers to seek alternative markets.”
With regard to semiconductors, Trump did not say when it will happen, but it will have a major impact on TSMC, which supplies 90% of the world’s advanced semiconductors and 60% of all semiconductors. If enacted, the law will cause US-based companies that rely heavily on overseas semiconductor manufacturing, facing higher production costs and delays to ensure the components they need.
This potential escalation of the trade war could further strain international production, particularly in the semiconductor industry. Countries relying on importing components for advanced technology can have difficulty ensuring these critical electronic components. This could increase costs and reduce availability across the high-tech sectors around the world.
The semiconductor industry is responding loudly to these tariffs. Hildegard Muller, president of the German Automotive Industry Association (VDA), has expressed concern that such tariffs will have a negative impact on global trade. Increased protectionism could harm manufacturing capabilities, national relations, and the US economy.
“Taxes are the wrong negotiation tool,” Muller said. “The risk of global trade disputes with negative impacts on the global economy is high. If tariffs respond with anti-abuse or other measures, a spiral will start moving. This means that consumers must pay more. Instead of fighting inflation, as promised, US President Donald Trump is promoting US inflation.”
A statement from John Nefer, president and CEO of the Semiconductor Industry Association (SIA), reflects Mueller’s concerns about the overuse of tariffs and the derailment of the semiconductor industry program.
“We are encouraged by President Trump’s goal of restoring US trade leadership, promoting American strength in semiconductors, and making our country religious. We understand that tariffs are tools in the trade policy toolbox. Without a careful approach, tariffs could make developing and producing American-American semiconductors and many important technologies effective, including artificial intelligence.”
As the US navigates trade relations, the semiconductor industry must adapt to these changing dynamics or to the risks that endanger future innovation and global competitiveness.
How China’s growing semiconductor technology can reshape the memory market
Since the global semiconductor shortage, countries have been working overtime to establish their own domestic semiconductor ecosystems. Like the US and the EU, China is devoted its resources to developing its semiconductor manufacturing capabilities. Specifically, some Chinese companies are stepping up their production to challenge the top three suppliers of memory.
According to Chosun Biz, some of that goals have been achieved. In a recent report published by Kistep, China “doesn’t beating South Korea in basic capabilities in all technical sectors, except for advanced packaging.”
This includes the Memory Sector, the memory sector, the beloved of Korea, where top memory producers Samsung Electronics and SK Hynix are home call home.
In 2022, “Korea held the second spot in the US and advanced packaging technology sectors of five semiconductor technology sectors. Meanwhile, in regions such as AI semiconductors, power semiconductors, and sensors, Korea ranked fourth and fifth in countries such as China, Japan, the EU and the US.”
Further ratings in 2024 revealed that 100% represents the highest level, while South Korea’s high density resistive memory technology only managed to get 90.1%. This is impressive, but heads behind 94.1% of China.
Meanwhile, Taiwan is ranked first for commercialising advanced packaging technology, while the US leads in all other technical fields, including basic capabilities and commercialization perspectives.
Kistep also points out that China is significantly outperforming South Korea in other regions, including AI semiconductor technology, power semiconductors and next-generation high-performance sensing technology. The two are evenly matched to the basic functions of 74.2% advanced packaging technology.
The report concludes that South Korea is the lowest in the country it has been evaluated, particularly in the basic capabilities and design technology level. This is heart-warming for Korea’s semiconductor lifecycle and where improvements are needed. Kistep says the issues contributing to this challenge are “out of “core talent, AI semiconductor technology, US-China competition, Korea’s domestic-centered policies, and rapid changes in supply chains.”
This reflected change, especially within memory, can affect the pricing and availability of key components of DRAM and NAND. This has early expressed concerns about “Flood of DRAM Components” accompanied by China’s growth within the sector. The move can benefit businesses looking to cut costs as global tensions rise, and increase exposure to geopolitical risks.
As China continues to invest in the semiconductor industry, its role in the global supply chain will only expand. This will challenge existing market leaders and restructure global trade patterns, particularly in the memory sector.
As the trade war between the US and China escalates and China continues to drive memory production, these developments will affect everything from pricing and availability to global competitive structures. The semiconductor industry must adapt to these changing dynamics and maintain a competitive edge in the ever-evolving technological environment.
