Chip Industry Holds Its Breath as Trade War Heats Up.
Semiconductor industry analysts and market watchers expressed concern after US President Donald Trump announced that the US would impose 25 percent tariffs on $50 billion of Chinese goods, including many products in the semiconductor supply chain.
US chip firms and their suppliers largely oppose the tariffs and the escalation of a trade war between the world’s two largest economies. The ultimate result, many fear, will be decreased sales of electronic products and components.
The Trump administration has argued that the tariffs are necessary to close a $375 billion trade deficit with China and counter Chinese policies deemed harmful to US industry, including required technology transfers and lax intellectual-property protection.
The SEMI trade group, which represents semiconductor equipment suppliers, EDA vendors, and companies involved in the electronics supply chain, has voiced support for the administration’s efforts to protect intellectual property, but said that it does not believe the tariffs will do anything to address US concerns over China’s trade practices.
Jay Chittooran, a public policy manager at SEMI, said that about 80 percent of the semiconductor products that appeared on the list of products that was 1st proposed for tariffs by the US Trade Representative back in April remain on the list, including products like test inspection equipment and spare parts that enter the US from China.
Bill McClean, president of IC Insights, said that the tariffs would lead to higher prices for consumers, a global slowdown in business, and a negative impact on just about every industry, including electronics.
“With the electronics industry having become more consumer-focused over the past 20 years, the impact could be severe,” said McClean. “Unfortunately, similar situations could possibly play out with the U.S. and Mexico and the US and Canada here shortly. “
Handel Jones, CEO of International Business Strategies, said that he just returned from a trip to China, where he said a key area of emphasis is now on becoming independent of the U.S. in high tech. According to Jones, China does not need US suppliers to make smartphones outside of a small number of components like RF.
China will have its own solutions or sources from Europe, South Korea, or elsewhere within 2 years, he said.
Someone says:” The key issue is: Who will build the manufacturing base? There are wafer fabs in the U.S., but wafer fab capacity in Asia is 10X that of the U.S. Packaging and testing is in Asia. Who is willing to set up the packaging and testing facilities in the U.S.? Design is mainly still in the U.S., but with China committing $47B to strengthen design, design momentum will shift to China. In 2017, design starts in U.S. was 3,520 and China was 1,655. In 2027, design starts for U.S. are projected to be 3,318, and China will be 3,280. Do not have data beyond 2027, but trends are clear. “
Other voice: “The US can’t and shouldn’t manufacture everything. The best candidates for manufacturing in the US are products those that require little labor (i.e. highly automated manufacturing) and/or are very costly to ship. I’ve been telling people for years who were complaining about Apple having the iPhone made in China (like almost all consumer tech gear is) that they’d eventually bring that back to the US. But those hoping for it to create hundreds of thousands of jobs like it does in China are going to be disappointed – they’ll bring it back when it is feasible to assemble them with robots instead of people. It’ll bring over about 1% of the total jobs that are in China, and they won’t be typical low skilled manufacturing jobs.”
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