US President Donald Trump has proposed 25% tariffs on semiconductor imports to boost domestic production, sparking concerns over global supply chains. While India faces no immediate impact due to zero import duty, experts warn of long-term shifts in FDI and supply chain strategies affecting major tech players
US President Donald Trump has been aggressively pushing for domestic production ever since he took charge of the White House for the second time. Fueling his America‑first agenda, the Republican President proposed imposing tariffs on several categories of imports, including semiconductors.
Referring to semiconductors, Trump in a recent announcement threatened to impose sweeping tariffs on “chips and things associated with chips.” There isn’t much information available on how much tariff will be imposed apart from a Bloomberg report suggesting the duties to be 25%.
According to the US President, these trade policies will be a more effective way of encouraging companies to manufacture chips in the US as compared to the CHIPS and Science Act. This Act provides subsidies to the US chip makers such as Intel, Micron and GlobalFoundries, facilitating domestic chip manufacturing. The Trump administration is reportedly planning to alter some parts of this Act to fuel further domestic production.
The reportedly proposed 25% tariff on semiconductor imports by the Trump administration is expected to have a significant impact on the global chip industry. Industry stakeholders are already preparing for its impact on the global semiconductor supply chains, major chip exporters of the world and emerging players like India.
However, India will not experience any major short‑term repercussions due to the proposed tariffs, as it is not a “major exporter of semiconductors to the US.” Moreover, India's import duty on semiconductors is already zero, meaning there are “no reciprocal tariff concerns,” said Ashok Chandak, President India Electronics & Semiconductor Association (IESA).
On the other hand, Indian companies exporting finished electronic goods are adopting a wait‑and‑watch approach before committing to new investments.
Prateek Munjal, Senior Consultant, Procurement, Aranca while explaining the long‑term implications of the tariffs said, “India could benefit from increased foreign direct investment (FDI) in design, OSAT (Outsourced Semiconductor Assembly and Test) and backend operations, as companies look to de‑risk their supply chains.”
According to Sohrab Bararia, Partner, Tax, Grant Thornton Bharat, "In the long run, these tariffs may serve as a catalyst for accelerated investment in India’s semiconductor ecosystem. The ₹76,000 crore Semicon India Programme could attract increased interest from global chip manufacturers looking to diversify their supply chains away from tariff-affected regions like China. As these suppliers become less competitive in the U.S. market, India may emerge as a more attractive alternative. Moreover, if major semiconductor-exporting nations form new trade alliances that exclude the U.S., India may benefit from increased collaboration with European and Asian countries, further strengthening its position in the global semiconductor landscape."
Some analysts also believe that the proposed tariffs will have a dual impact on the semiconductor industry, affecting both traditional semiconductor powerhouses and emerging ecosystems like India's. The primary aim of these tariffs is to preserve US leadership in advanced semiconductor technology, specifically chips produced using cutting‑edge processes below 10nm. However, this focus may have significant repercussions for legacy semiconductor supply chains, which rely on older‑generation chips (over 28nm) used in autos, industrial applications and consumer electronics.
According to Fab Economics, a US‑based semiconductor investment advisory firm, the Trump administration's tariffs are mainly intended to prevent the offshoring of advanced semiconductor technology. Yet, the real damage could emerge in the legacy chip market. These chips operate on razor‑thin margins and due to high relocation costs cannot easily be shifted to US production.
Globally, a higher tariff on semiconductors by the United States will influence costs, supply chains, innovation and geopolitical dynamics, negatively affecting the semiconductor industry.
Analysts expect it to significantly increase the US import cost of semiconductors, particularly from Taiwan, South Korea and China, which dominate global chip manufacturing. “Companies that depend on semiconductor imports, such as Apple, NVIDIA and Tesla, will face increased production costs, potentially leading to reduced profit margins or higher consumer prices,” said Chandak.
Prices of smartphones, laptops, electric vehicles and industrial electronics are also expected to rise due to the direct impact of tariffs. “With the US accounting for only 11% of global chip production, expanding capacity will require significant investments and long lead times, which is likely to keep prices elevated in the short‑to‑medium term,” said Munjal.
Companies may diversify their supply chains by sourcing chips from tariff‑free regions or by increasing domestic investments to mitigate risks. However, shifting supply chains is a complex, time‑consuming process, and establishing new semiconductor manufacturing partnerships can take years given the complexity and cost of semiconductor fabs.
"The imposition of the 25% semiconductor tariff by the U.S. is expected to create region-specific cost volatility across global supply chains. Countries most affected by the reciprocal tariffs are likely to experience chip price inflation, stemming from the combined impact of increased duties and the logistical challenges of rerouting supplies. In response, companies may accelerate efforts to diversify their supply chains by sourcing semiconductors from tariff-free regions or ramping up domestic investments to mitigate risks. Additionally, the tariffs could disrupt existing supplier contracts, particularly for OEMs that depend on U.S. chipmakers. These disruptions may lead to contract renegotiations and delays in sourcing, which can impact the automotive, telecom, and industrial sectors," said Bararia.
Historically, Trump has offered very few exceptions to his current tariff policies, and the new steel and aluminium tariffs even nullified some previously agreed‑upon exemptions from his first term. Despite his earlier insistence that there would be no exclusions, he is reportedly considering relief for Australia, partly due to the significant US trade surplus with the country, according to The Associated Press.