US Tariffs on Semiconductor Equipment Could Exceed $1 Billion Annually

Recent evaluations indicate that tariffs imposed by the U.S. government could result in annual losses exceeding $1 billion for domestic semiconductor equipment manufacturers. This analysis was shared during discussions with government officials and lawmakers in Washington, highlighting significant financial implications for the industry.

The three leading U.S. chip equipment producers--Applied Materials, Lam Research, and KLA--are projected to each incur losses of approximately $350 million annually due to these tariffs. Additionally, smaller companies in the sector, such as Onto Innovation, may also face financial burdens amounting to tens of millions of dollars.

This report, revealing the potential financial repercussions on the semiconductor equipment industry, comes amid ongoing dialogue between industry leaders and U.S. officials. The companies are critical players in the global chip manufacturing landscape, producing sophisticated equipment that relies on thousands of specialized components.

The semiconductor equipment sector has already experienced substantial revenue declines following a series of export restrictions introduced during the previous administration, aimed at limiting the transfer of advanced chip manufacturing technologies to Chinese firms. Although the Trump administration has temporarily suspended certain reciprocal tariffs initially announced in April, further duties on the chip industry are being considered as part of a broader strategy to enhance U.S. manufacturing capabilities.

The financial estimates discussed recently in Washington encompass the loss of revenue from missed sales opportunities, particularly for less advanced equipment that could have been sold to international competitors. Moreover, the expenses associated with sourcing alternative suppliers for the complex components used in chipmaking tools are factored into the overall financial impact. Compliance costs related to tariff regulations, including the need for additional personnel to navigate the complexities of adherence, are also included in the calculations.

Lawmakers and administration officials engaged in discussions with semiconductor executives and representatives from SEMI, an international trade association, as part of their ongoing consultation regarding the industry's challenges. While Applied Materials has not provided comments on the findings, KLA and Lam Research have opted not to publicly address the matter.

The preliminary estimate of $350 million in annual losses per company may be subject to change as the implementation of tariffs progresses. Due to the multifaceted nature of chipmaking tools, which consist of numerous components, accurately predicting the financial impact remains challenging.

In response to U.S. export controls designed to hinder China's ability to manufacture cutting-edge chips applicable in artificial intelligence and military sectors--areas considered vital to national security--China has increased its investments in domestic chip manufacturing capabilities. This situation underscores the ongoing tensions between the U.S. and China in the semiconductor arena, impacting global supply chains and technological advancements.