# Semiconductors Entangled in Trade War Dispute

- Link: https://www.thailand-business-news.com/china/215136-semiconductors-entangled-in-trade-war-dispute
- Published: 2025-05-02T11:18:00+07:00
- Author: Thai Video News

The ongoing trade war between the United States and China has intensified scrutiny
on the semiconductor industry, a vital sector for technological innovation and economic
growth.

The U.S.-China trade war has deeply entangled the semiconductor industry, a cornerstone
of modern technology critical for electronics, AI, and defense. Below is a focused
analysis of the situation, addressing the trade war’s impact on semiconductors and
whether China is truly “hit hard” by tariffs and related measures.

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As both countries impose tariffs and other trade barriers, semiconductor companies
find themselves navigating a complex landscape, impacting supply chains and pricing
structures. The conflict highlights the critical role semiconductors play in various
technologies, from smartphones to military systems.

## Key Dynamics of the Semiconductor Trade War

 1. **U.S. Tariffs and Restrictions**:
 2.  * **High Tariffs**: U.S. tariffs on Chinese goods, including **semiconductors,
       have reached up to 145%** in some cases, significantly raising costs for Chinese
       imports. These tariffs aim to curb China’s tech competitiveness and encourage
       U.S. manufacturing.
     * **Export Controls**: Since October 2022, the U.S. has restricted exports of 
       advanced chips (e.g., 7nm and below) and chipmaking equipment to China, **targeting
       firms like SMIC and Huawei.** The goal is to limit China’s ability to develop
       cutting-edge technologies.
     * **Entity List Sanctions**: Companies like **Huawei and SMIC are barred from 
       accessing U.S. technology**, including software and equipment, disrupting their
       supply chains.
     * **Allied Restrictions**: The U.S. has enlisted Japan and the Netherlands to 
       limit exports of advanced tools, such as ASML’s EUV lithography machines, critical
       for producing high-end chips.
 3. **China’s Countermeasures**:
 4.  * **Export Bans on Rare Earths**: **China, controlling 70% of global rare earth
       production **(e.g., gallium, germanium), has restricted exports to the U.S.,
       impacting chip production and increasing costs for Western firms.
     * **Domestic Investment**: China has allocated over** $150 billion to its semiconductor
       industry, aiming for 75% self-sufficiency **by 2025. SMIC’s production of 7nm
       chips in 2023 shows progress, though it trails global leaders like TSMC.
     * **Workarounds**: Chinese firms use intermediaries, chip stockpiling, and alternative
       supply chains (e.g., via Southeast Asia) to mitigate U.S. restrictions.
     * **Retaliatory Tariffs**: China’s tariffs on U.S. goods, up to **125%, target
       American tech and agricultural exports**, escalating the trade war.
 5. **Global Supply Chain Impact**:
 6.  * **Taiwan and South Korea’s Role**: **Taiwan’s TSMC produces 90% of the world’s
       advanced chips**, making it a critical player. South Korea’s Samsung also plays
       a significant role. Both face pressure to align with U.S. policies while maintaining
       trade with China.
     * **Supply Chain Disruptions**: The trade war has reduced China’s chip imports
       by ~30% in 2023 and raised costs for U.S. firms like Nvidia, which saw a 20%
       revenue drop in China. Global chip shortages persist, exacerbated by these tensions.
     * **Decoupling Risks**: U.S. efforts to “de-risk” and China’s push for self-reliance
       threaten to fragment the $600 billion semiconductor market, potentially stifling
       innovation and increasing costs.

## Broader Implications

 * **Economic Costs for Both Sides**: U.S. consumers face higher prices due to tariffs,
   with estimates suggesting a 0.5% inflation increase. U.S. chipmakers lose market
   share in China, while Chinese firms grapple with higher production costs.
 * **Geopolitical Stakes**: Semiconductors are a proxy for U.S.-China technological
   supremacy, with Taiwan’s role amplifying risks of escalation. The trade war fuels
   broader tensions, affecting global markets and alliances.
 * **Long-Term Trends**: The push for supply chain diversification (e.g., U.S. CHIPS
   Act, EU’s Chips Act) may reduce reliance on China but faces hurdles like high
   costs and talent shortages. China’s focus on self-reliance could reshape global
   tech dynamics if it overcomes technical barriers.

Semiconductors are deeply entangled in the U.S.-China trade war, with tariffs and
restrictions creating significant hurdles for China’s high-end chip ambitions. While
China faces setbacks—particularly in advanced chip production—it is not “hit hard”
in a crippling sense. Its dominance in legacy chips, government-backed innovation,
and global trade networks provide resilience. However, sustained U.S.-allied pressure
could widen the technological gap unless China achieves breakthroughs. The dispute
risks long-term global supply chain fragmentation, with both sides incurring economic
and strategic costs.

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