Proposed U.S. tariffs could cost American semiconductor equipment manufacturers over US$1 billion annually, according to industry estimates shared with officials in Washington.

Major companies like Applied Materials, Lam Research, and KLA could face losses of about US$350 million each per year.

Smaller firms, such as Onto Innovation, may incur additional costs in the tens of millions.

These costs include lost sales of older equipment to foreign competitors, tariff compliance, and sourcing alternative suppliers for specialized components.

The US chip equipment industry has already seen significant revenue losses due to previous export controls aimed at limiting China’s ability to produce advanced chips.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Tariffs create a recurring pattern of unintended consequences in tech

History shows that tech tariffs often accelerate the very developments they aim to prevent.

The 1987 Reagan administration tariffs on Japanese electronics, aimed at protecting U.S. companies, failed to significantly reduce the U.S. trade deficit or protect domestic manufacturers 1.

Similarly, the 1986 U.S.-Japan Semiconductor Agreement designed to limit Japanese chip exports inadvertently raised costs for American computer manufacturers, harming their global competitiveness 2.

This pattern appears to be repeating as China has already increased investment in domestic chip equipment manufacturing in response to Biden-era export controls, potentially creating new competitors for U.S. firms 3.

The semiconductor industry’s highly specialized nature means tariffs can disrupt complex global supply chains that took decades to optimize, affecting production costs and development timelines.

Companies like Applied Materials and Lam Research now face the paradox of tariffs meant to protect their interests potentially weakening their competitive position.

2️⃣ The true cost of tariffs extends far beyond direct fees

The billion-dollar tariff impact on chip equipment makers encompasses costs that aren’t immediately visible.