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Journalism of Courage
WHY NOW?
Amid the ongoing “tariff war” between the United States and China, the Trump administration announced on Saturday (April 12) that smartphones, computers, and certain other electronic devices would not be covered under the 125% reciprocal tariffs on China. It comes as a relief to companies like Apple that have a large-scale manufacturing base in China.
In a social media post on Monday, US President Donald Trump wrote that the move was not exactly an exemption but simply the movement of products to a lower tariff “bucket” of 20%.
He added, “We are taking a look at Semiconductors and the WHOLE ELECTRONICS SUPPLY CHAIN in the upcoming National Security Tariff Investigations. What has been exposed is that we need to make products in the United States, and that we will not be held hostage by other Countries, especially hostile trading Nations like China, which will do everything within its power to disrespect the American People.”
As the name suggests, a semiconductor can periodically conduct electricity or block its flow. The semiconductors in use today are made of materials such as silicon and comprise millions of transistors that act like miniature electrical switches, flipping on and off to process data such as images, radio waves, and sounds.
Semiconductors are found in most modern technology, from household appliances to sophisticated defence systems, mobile phones to cars, toys to high-end luxury products. They are also called microchips or integrated circuits.
WHY DO SEMICONDUCTORS MATTER TO THE US?
It’s not only the United States which wants to become self-reliant in the production of semiconductors. As technology proliferates rapidly worldwide, semiconductors have become key to ensuring high-end manufacturing domestically and fulfilling the growing demand for smartphones, laptops and other electronic devices. The growing integration of artificial intelligence (AI) in modern devices also matters in this context because AI systems are trained using specialised chips known as Graphics Processing Units (GPUs).
What became obvious during the Covid-19 pandemic, which dealt a blow to global supply chains for some time, was the dominance of a few players in semiconductor manufacturing (mostly in Taiwan). The manufacturing process is also costly and requires a constant electricity supply and “ultrapure” water to remove residue from silicon chips, making it difficult for many countries to replicate Taiwan’s success.
A 2020 report by the Semiconductor Industry Association and the Boston Consulting Group estimated that the US only accounted for 12% of the world’s semiconductor manufacturing, a decline from 37% in 1990.
Going back to the US, Trump’s commerce secretary, Howard Lutnick, said on Sunday that critical technology products and semiconductors from China would face separate, new duties within the next two months.
“He’s saying they’re exempt from the reciprocal tariffs, but they’re included in the semiconductor tariffs, which are coming in probably a month or two,” Lutnick said in an interview on ABC, predicting that the levies would bring production of those products to the United States. “These are things that are national security, that we need to be made in America.” Given the complexity of chip manufacturing, it remains to be seen whether tariffs by themselves can help their production in the US.
