”From chip shortage to power play: The impact of US-China tariffs on the semiconductor industry”

Svensk Elektronik is actively involved in the global and strategically important semiconductor issue. To give our members a clearer picture of this dynamic area, our CEO Elisabet Österlund has compiled a status report. This report summarizes the global challenges and opportunities and presents concrete suggestions and strategies for how Swedish electronics companies can act in this new reality.

The strategic importance of semiconductors

Semiconductors are at the heart of all modern electronics, powering everything from mobile phones and cars to AI, energy systems and military applications. US President Donald Trump has called semiconductors “a matter of national security” because they drive everything from commercial innovation to defense technology. Only a few countries and companies (including TSMC in Taiwan, Samsung in South Korea and leading equipment manufacturer ASML in the Netherlands) dominate the most advanced manufacturing processes. This makes semiconductor supply chains vulnerable to disruption. Strategically important technologies such as AI, 5G and electric vehicles depend entirely on access to advanced semiconductors, making secure supply chains and in-house production a priority for many countries. As the production of advanced chips increases, so does energy use and environmental impact.

Effects of the US-China trade war on the semiconductor industry

The trade conflict between the US and China has intensified with increased tariffs and export controls on high-tech goods, including semiconductors and chip manufacturing equipment. In 2025, the US has considered special fees on semiconductor imports. At the same time, the US has imposed strict export restrictions on Chinese chip manufacturers (e.g., the US imposed restrictions on over 140 Chinese companies at the end of 2024), which has forced China to increase its domestic production and development of chip tools. China is responding to the US with countermeasures – Chinese authorities and industry associations have urged domestic companies to avoid US chips and instead buy locally (”US chips are no longer safe”). These mutual barriers have led to higher costs and uncertainty in supply chains – consumer products are becoming more expensive (e.g., phones and cars) and the stock market has become more volatile. For large companies, higher prices for advanced equipment (e.g., ASML’s lithography machines) mean that planned investments are becoming significantly more expensive.

Impact on production, innovation and investment going forward

The increased trade barriers are expected to lead to both short-term disruptions and long-term restructuring of semiconductor production. In the short term, demand risks being dampened as electronics become more expensive and consumers wait, which is already visible in declining sales of mobile phones and computers. In the longer term, the conflicts are driving major investments in local production: companies and governments are investing record amounts in new factories. For example, TSMC announced a new $100 billion investment plan in early 2025 for five new semiconductor factories in the US, partly in response to US stimulus measures and pressure (Trump recently threatened an additional $100 billion tax if TSMC does not build in the US). Japan has launched a package of measures worth around $65 billion until 2030 to strengthen its chip and AI industry, and India approved three new semiconductor factories worth around $15.2 billion in early 2024. These national investment programs often focus on advanced chips for AI, among other things. At the same time, companies around the world are being forced to slow down or restructure their development and capacity planning: export controls and uncertainty may delay the development of next-generation chips while new innovation centers are being built in the US, Europe and other countries.

Corporate and national strategies for managing tensions

Companies and governments are taking several steps to make supply chains more resilient. Reshoring/onshoring: The US CHIPS Act and similar programs in Europe and Asia subsidize local chip manufacturing. In the US, the plans include billions in grants and loans to attract production home. The Trump administration has even started paying companies (or threatening to tax them) to build factories in the US. In the EU, the ”Chips Act” has been adopted with around €43 billion for joint investments (with additions from member states) – the focus is on building up domestic capacity, especially in mature processes that are important for vehicles and energy systems, and where European companies are already strong.

Friendshoring and diversification: Countries also want to cooperate with ”friend countries”. For example, the US is entering into partnerships with Mexico to develop the semiconductor chain there, and is promoting cooperation with Japan, South Korea, Taiwan and India through technology collaborations (including iCET with India). At the same time, companies such as TSMC, Samsung and Intel are exploring new factory locations (both in the US and in other regions) in order to avoid dependence on individual markets. Several large chip companies are also redistributing research and development to countries where they receive support, and are looking for new suppliers for materials and equipment. Companies with diversified chains and a presence in several markets are benefiting, while those that are highly dependent on China are facing more difficult competition.

National investment programs: In addition to the US, the EU and Japan, many countries are investing heavily in semiconductor technology. South Korea and Taiwan are increasing their national investments in advanced research centers, and companies such as Foxconn and Tower Semiconductor are planning joint factory projects in India (Tata/Powerchip and Adani/Tower, together over $10 billion). Even small countries with technology bases are investing: the US is cooperating with Canada and the EU with Norway on raw material security to avoid rare earth metals and other components becoming new bottlenecks.

Future prospects

As a result of trade conflicts and the extensive stimulus programs, the global semiconductor industry is rapidly reshaping. In the short term, profitability and innovation are being squeezed by uncertainty and higher costs – market volatility is high and consumers are being hit by more expensive electronics. In the longer term, government subsidies and corporate strategies are driving a spread of manufacturing and R&D to new regions. This can make the industry more resilient – but also more fragmented. Friendly coalitions and new factory investments (e.g. the US and EU ”home swap”) are boosting production outside China, while China is investing enormous resources to build its own capacity and close the gap (despite US export controls, Chinese chip companies believe they can ”weather” these restrictions).

Overall, current developments indicate that the global semiconductor industry is becoming more decentralized. Countries and companies must balance competitive advantages (lower costs, close to customers) with security needs (locally owned production and close collaboration partners) to secure future innovation and delivery capabilities.

Sources: Reports and news articles (2024–2025) from Reuters, among others, have been used for facts and quotes in this status report.

How can Swedish companies act in this changing world?

Diversify and strengthen the supply chain

Challenge: High concentration among a few suppliers and geopolitical disruptions increase the risk of disruptions and cost increases.

Measure:

Map the entire value chain; identify “single points of failure” and alternative suppliers in different regions (such as EU, India, Southeast Asia).
Establish relationships with both Tier-1 and Tier-2 suppliers outside of China, e.g. in Europe.
Review “buffer stocks” of critical components and enter into agreements with flexible volume options (call-off contracts) to cope with shorter interruptions.

2. Invest in your own R&D collaborations

Challenge: Technological and capacity dependence on specific suppliers (such as TSMC, Samsung and ASML) makes an innovation vulnerable.

Measure:

Participate in national, European (Chips JU) and international projects to gain access to R&D and pilot production in next-generation technology as well as access to international partners.
Build partnerships with Swedish universities (Chalmers, KTH, Lund, Linköping, Uppsala, Luleå, etc.) and research centers for joint testbeds and research projects.
Encourage internal skills development by hiring chip designers and system architects and offering continuing education.

3. Friend-shoring and regional co-investments

Challenge: The trade conflict between the US and China is creating tariff barriers and export controls.

Measure:

Collaborate nationally for a common strategy and investments through collaboration in the semiconductor cluster Semicon Sweden and strengthen the competitiveness of Swedish companies and organizations. www.semiconsweden.com

Expand the Swedish semiconductor cluster to collaborate with neighboring Nordic and Baltic companies and organizations to build a regional semiconductor cluster that can benefit from EU support and Nordic expertise in areas such as sustainability and automation.
Explore collaborations and joint investments in “friendship countries” (e.g. India, Japan, South Korea) to secure market access and access to support.
Evaluate the possibility of establishing test facilities and packaging solutions close to the customer base to shorten lead times.

4. Risk and scenario planning

Challenge: Rapid geopolitical shifts and trade measures make the future uncertain.

Measure:

Introduce continuous scenario planning (e.g. “best case”, “most likely”, “worst case”) for trade barriers, and link this to investment and inventory planning.
Develop “early warning” indicators (e.g. changes in tariff levels, export control lists, political statements) that trigger escalation meetings and immediate action.
Integrate supply chain financial stress testing into the management function to understand liquidity and cost implications.

5. Leverage digitalization and flexibility

Challenge: Volatile volumes and rapid technological shifts require rapid adaptation.

Measure:

Implement planning tools and digital twins to simulate the supply chain and optimize inventory planning in real time.
Evaluate modular product design (“design for flexibility”) so that circuit boards and systems can be adapted to different chip suppliers in the event of shortages.
Evaluate investing in automation and Industry 4.0 solutions in your own factories to quickly scale up or down production.

6. Policy engagement and industry collaboration

Challenge: National support programs require lobbying efforts and coordination to achieve success.

Measure:

Join industry organizations (Svensk Elektronik www.svenskelektronik.se) to influence Swedish and EU policy on strategic issues affecting electronics and semiconductors (e.g. support and subsidies, laws and directives, taxes and export controls).
Collaborate nationally (Semicon Sweden www.semiconsweden.com) and with other European actors to ensure that Swedish interests are taken into account in the EU's Chips Act implementation.
Drive joint applications for innovation and R&D grants for infrastructure and skills building.

Summary proposal for roadmap

Time horizon	Main focus	Key actions
0–6 months	Emergency risk management	Mapping, alternative suppliers, safety stock
6–18 months	Capacity building & collaborations	EU projects, university partnerships, digital planning
18–36 months	Reshoring/Friend-shoring & R&D deepening	Invest in your own pilot production, regional factories and R&D
Long term	Resilience & continuous innovation	Scenario planning, policy influence, modular product design

By working in parallel with these six strategic tracks, Swedish companies can both protect their operations against short-term disruptions and build long-term competitiveness in a more fragmented, geopolitically characterized semiconductor world.

Elizabeth Osterlund
CEO Swedish Electronics

Semiconductor Reports