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Austin-area experts, lawmakers weigh in on impact of looming semiconductor tariffs

Austin-area experts, lawmakers weigh in on impact of looming semiconductor tariffs

Yahoo22-04-2025

Tech and manufacturing companies are bracing for looming semiconductor tariffs after President Donald Trump launched an investigation last week into the effects on national security of importing semiconductor technology.
The investigation came just a day after Trump hinted at imposing tariffs on chips and pharmaceuticals amid a broader trade war.
"The number one word is uncertainty," Austin Chamber of Commerce president and CEO Jeremy Martin told the American-Statesman.
In Texas and in the Austin area, companies are currently in a waiting game, looking for how to cope with imposing tariffs, likely retaliatory ones from other countries and a broader trade war that is putting artificial intelligence and chips in the national spotlight once again.
Semiconductors are chips that enable technologies like those found in smartphones and computers to function.
Over the past several years, lawmakers have pushed for greater investment in the manufacturing and workforce training in the U.S. related to semiconductors. Such efforts, like the $280 billion CHIPS and Science Act signed into law by former President Joe Biden in 2022 and the Texas CHIPS Act signed into law by Gov. Greg Abbott in 2023, aim to encourage manufacturing of the essential technology on American soil.
Trump has initiated tariffs across industries over the past several weeks, taking aim at China, Canada, Mexico and even uninhabited islands home to only penguins and seals. A broader trade war is rattling companies and consumers around the world, but initially, semiconductors were left exempt.
That is until last week when the Trump administration took action that will likely result in new tariffs on semiconductors, as well as pharmaceutical products, in a greater effort to onshore manufacturing as a matter of national and economic security.
According to federal notices, the administration initiated national security investigations into imports of chips and pharmaceuticals, likely setting the stage for tariffs on both. The tariffs would be issued under Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs to protect U.S. national security.
Prior to the CHIPS and Science Act, the U.S. lacked any leading-edge semiconductor fabs capable of producing the chips crucial for artificial intelligence or at the scale comparable to other countries. The U.S. relied, and still does, on foreign companies for these advanced chips.
Nearly three years after Biden signed the act, semiconductor manufacturing is still largely outside of the U.S., with the Taiwan Semiconductor Manufacturing Company's facility in Arizona, which will eventually produce 30% of the company's most advanced chips when its plants are operational, being one of the only U.S.-based facilities capable of producing these chips.
"It's not just going to happen overnight," Scott Almassy, who is a partner at global accounting firm PwC, told the American-Statesman. "It takes a while for supply chains to evolve. It took (about) 40 years for the industry to get to where it is today in terms of the whole interconnected, complex global environment.
With the Section 232 investigation pending, companies are looking for short-, medium- and long-term solutions to address the looming tariffs, but most of them are in a waiting game, according to Almassy, who leads PwC's semiconductor practice and works directly with industry leaders.
The results of the investigation, Almassy said, will drive a lot of behaviors.
These possible solutions range from moving supply chains and source from countries with lower tariffs, changing costs of products, looking for manufacturing partners or vendors already in the U.S. or looking into investing in facilities in the U.S.
Almassy said the largest hinderances, beyond time, are education and costs.
"That's just how the economy has been constructed over time. ... So, one is cost, that's the longer-term reason why there's less of (semiconductor manufacturing) in the U.S. Because the U.S. is focused a lot more on research and development. There's a push for that. The second thing, though, is do we have the skill set and the knowledge and the employee base in the U.S. to manufacture these semiconductors. Cost plus labor or education, those are the things that you can't fix those overnight, right?"
U.S. Rep. Lloyd Doggett, D-Austin, said tariffs on semiconductors, and the likely retaliatory ones from other countries, will drastically increase costs and risk businesses and jobs.
According to Doggett, some Austin-area companies are already expecting layoffs and consumers will carry the majority of the costs related to the tariffs. The tariffs are already expected to cost chip equipment makers more than $1 billion.
"After proclaiming that 'tariff' is the most beautiful word in the dictionary, Trump's erratic actions have created a climate of chaos and uncertainty that discourages business investment. ... The Trump approach penalizes Austin area manufacturers, who design cutting-edge chips that are manufactured abroad," Doggett told the American-Statesman. "Trump's tariff tax on raw wafers, chemicals and other critical supplies needed to make chips here will have the opposite effect by making it significantly more expensive to produce semiconductors and the many critical technologies they enable, like artificial intelligence. And retaliation from other countries may also limit access to essential materials. Trump is endangering the economic and national security interests we have in U.S. companies maintaining cost-competitive access to these materials."
According to Almassy, semiconductor tariffs will raise the price of virtually everything.
More: Trump's tariffs could raise the price of your next iPhone. Here's by how much
Almassy's belief, he said, is that the Trump administration is taking special considering for the semiconductor and health care industries with the Section 232 investigation due to how essential they are for everyday life.
Semiconductors power everything from phones and computers to refridgerators, cars, televisions, lightbulbs, medical devices and more, and Almassy thinks that is why Trump is especially concerned with tariffs on the essential technology.
Almassy expressed concern about how the tariffs would be implemented. He noted that many devices and everyday appliances contain multiple semiconductors. If tariffs are applied to each semiconductor in an import, he worries that costs could escalate rapidly.
"Semiconductors, they power everything. ... It could very much impact the cost of things that maybe were not quite that significant, but it escalates very quickly," Almassy said.
Some manufacturers and lawmakers, however, believe tariffs are needed to spur U.S. semiconductor manufacturing.
Martin said some of the chamber's members are optimistic about increased foreign direct investment and the possibility for more manufacturing dollars to pour into Texas.
Kevin Fincher, CEO of Austin Regional Manufacturers Association, said the tariffs are a matter of national security and therefore are essential to decouple from China.
"Manufacturers who have supply chain in China are going to feel it the most," Fincher told the American-Statesman. "So, when you look at global tariff policy, and again, what I'll go back to is the U.S.'s intent is to decouple from China, and it is working the tariff policy to get other countries, like the (European Union), to also decouple from China. ... China is an adversary. People need to understand that China is an adversary, and you cannot have your industrial-based manufacturing in an adversarial country. That is the national security issue that is being addressed right now."
Still, Fincher said, global supply chains and workforces cannot be moved or generated overnight. There are going to be growing pains, he said, and consumers and companies alike will feel the costs.
U.S. Rep. Michael McCaul, R-Austin, echoed those sentiments to the American-Statesman in a statement, saying while onshoring manufacturing is necessary, manufacturing capacity cannot increase overnight.
"It won't happen overnight," McCaul said. "In the meantime, I urge the administration to maintain U.S. access to the semiconductor chips we need from other nations as we work to re-shore these crucial national security assets and put America first.'
More: What is a reciprocal tariff? What Texas lawmakers had to say about Trump's new tariff plan
While the Austin-area has certainly grown to be a leader in the semiconductor industry in the U.S., large-scale manufacturing in the Lone Star State is still nascent.
Samsung Electronics' manufacturing facility in Taylor, Samsung Austin Semiconductor, is not expected to come online until, at the earliest, 2026. Texas Instruments is still in the early stages for its $30 billion 300-millimeter semiconductor wafer fabrication plants in Sherman. Other semiconductor companies have headquarters or offices in Texas, like Tokyo Electron Ltd., or TELL, a global leader in semiconductor manufacturing that opened its new U.S. headquarters in Austin last week.
At the TEL ribbon-cutting last week, Zentaro Naganuma, the Consul-General of Japan in Houston, told the audience that America and Japan need greater cooperation to support semiconductor manufacturing. He emphasized that semiconductors are essential to the global economy and supply chain, and that partnerships are even more important in times of tariffs
Mark Dougherty, Tokyo Electron America & TEL Manufacturing and Engineering America president, told reporters at the ribbon-cutting that more and more people are becoming aware of semiconductors and their necessary presence in everyday lives. Outside of Japan, U.S. is home to TEL's only other manufacturing footprint and largest research and development footprint. Dougherty described the new headquarters opening was "great timing" in terms of the greater global economy.
"The populace at large is becoming more and more aware of 'what are semiconductors? Why do they matter? How do we make them?' And certainly, at the state and federal level, of course, this is much more in the daily dialog," Dougherty said. "We have not just what I would call a narrative, but really a core set of, here is how we are building our business that, in large measure, is intended to be able to support the regrowth or return or expansion of the semiconductor industry here in the United States."
At the end of the day, Almassy said the semiconductor industry is left with a level of uncertainty over what happens next.
"The lack of certainty about where things are headed, it's causing some consternation with regard to decision making. I wouldn't say any companies are just sitting on their hands, hoping things go away. Obviously, everybody's scenario planning and trying to figure out what they can do. Maybe the 232 investigation will add some clarity to it? But then again, you've also got 70+ countries that have to negotiate trade deals. What's that interplay look like?"
This article originally appeared on Austin American-Statesman: Semiconductor industry waits to see impacts of potential tariffs

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