May 13, 2024   

U.S. Semiconductors to Surge as New Tariffs Loom

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Image credit:  Semiconductor Industry Association

New era emerging with increased domestic production and new trade barriers expected


Semiconductors are integral to the global economy, serving as the backbone of modern electronics, including those used in lighting fixtures and lighting controls systems. Currently, the U.S. is taking significant steps to increase domestic semiconductor production, a move paralleled by the seemingly imminent implementation of new tariffs on semiconductors imported from China. These dual developments may have profound implications for the semiconductor and related industries, including lighting technologies.

The United States has plans to significantly enhance its semiconductor manufacturing capabilities, as outlined in a comprehensive report by the Semiconductor Industry Association (SIA) and Boston Consulting Group. This report forecasts an ambitious 203% growth in domestic semiconductor production from 2022 to 2032, elevating the U.S. from holding 10% to 14% of the global semiconductor capacity. Such a surge is set to be the largest rate of increase worldwide, driven by the incentives and provisions of the CHIPS and Science Act.


This substantial boost in production capabilities will also notably include a dramatic increase in advanced logic manufacturing, where the U.S. is expected to grow its share to 28% of global capacity by 2032, a significant leap from 0% in 2022.


New Tariffs are Reportedly Imminent

According to multiple reports in recent days, the U.S. is set to introduce a new series of tariffs targeting Chinese semiconductors and electric vehicles (EVs) as part of its broader strategy to address national security concerns and recalibrate competitive imbalances in the tech sector. This expected action is a continuation of the U.S. government's rigorous measures aimed at countering China's technological ascendancy, exemplified by the recent withdrawal of export licenses to prominent Chinese companies such as Huawei.

These impending tariffs are expected to alter international trade dynamics, reshaping relationships not only between the U.S. and China but also affecting global supply chains and market practices. By targeting key areas like semiconductors and electric vehicles—sectors where China has sought to establish a dominant export presence—the U.S. aims to protect its technological base and ensure a more level playing field for American companies.


Implications for the Lighting Industry

The expansion in U.S. semiconductor production and the new tariffs could impact the lighting industry in several ways. While there is no direct indication that LED chip production will shift to the U.S., the general boost in semiconductor production could mitigate some of the long lead times experienced from 2020 to 2022 due to global supply chain disruptions. Moreover, by reducing reliance on Asian semiconductor suppliers, U.S. lighting manufacturers may face less supply chain risk for certain components.

However, it is unclear how the cost of U.S.-manufactured semiconductors will compare to those from Asian suppliers. Tariffs might level the playing field cost-wise, but the overall impact on pricing remains to be seen. Lighting industry stakeholders will need to navigate these changes carefully, possibly adjusting their supply chain strategies and preparing for shifts in component sourcing and pricing structures.