Washington: US President Donald Trump has announced plans to introduce 100% tariffs on semiconductor imports, a move that could significantly impact the global tech industry. Semiconductors, essential components in a wide array of devices, are crucial to both modern technology and the global economy. While some semiconductor producers could be exempt from these tariffs, the broader tech industry could feel the effects, potentially leading to increased product prices.

According to BBC, semiconductors have the unique ability to partially conduct electricity, allowing them to function as electronic switches and process the binary language fundamental to computing. The US, alongside the UK, Europe, and China, heavily relies on Taiwan for semiconductors, with Taiwan Semiconductor Manufacturing Company (TSMC) supplying over half of the world’s semiconductors. TSMC, established in 1987, caters to tech giants such as Nvidia, Apple, and Microsoft and has been a focal point in the ongoing “chip wars” between the US and China.

President Trump’s proposed tariffs aim to bolster domestic manufacturing by encouraging companies to produce more semiconductors within the US. This initiative aligns with his “reciprocal” tariffs policy, which seeks to reduce reliance on foreign imports. Although smartphones, computers, and certain electronic devices were previously exempt from tariffs, Trump reaffirmed in August his plans to impose a 100% tax on foreign-made semiconductors unless companies increase their investment in US-based manufacturing.

The potential tariffs could have widespread implications for both chipmakers and tech companies that depend on them, as most are situated outside the US. This policy could lead to delays as firms transition production to the US or result in increased consumer prices if manufacturers pass on the tariff costs. However, companies like Apple are expected to evade these tariffs due to significant investments in US manufacturing, prompting a rise in TSMC’s share price.

South Korean companies Samsung and SK Hynix, significant players in the semiconductor market, are also likely to avoid the tariffs due to their investment in new US chip fabrication plants. This initiative reflects the growing trend of semiconductor companies boosting their US presence, driven by legislative incentives such as the US Chips Act, which offers funding awards to firms moving manufacturing to the US.

Despite these efforts, challenges remain, particularly a shortage of skilled workers, which has previously delayed production at TSMC’s new factory in Arizona. This labor shortage underscores the broader challenges the US faces in expanding its semiconductor manufacturing capabilities.