US President Donald Trump’s threat to levy a 25 per cent tariff on chip imports is set to hit the global semiconductor industry very hard. However, experts see no major impact on India in the short term.
The Indian Electronics and Semiconductor Association (IESA) has said that imposition of a 25 per cent or higher tariff on semiconductors from the US is expected to have significant consequences for the global semiconductor industry. It, however, may not have any major short-term impact on India.
This move may potentially violate the Information Technology Agreement (ITA) — an international treaty that the US and many countries has signed. As a result, major US semiconductor companies could resist against the tariffs, given that many rely on Asian foundries and OSAT facilities for production, Ashok Chandak, President IESA, said.
“This move will impact costs, supply chains, innovation and geopolitical relations, shaping the industry’s future in multiple ways,” he explained.
“India, however, is unlikely to experience any major short-term consequences due to this tariff, as it is not a major exporter of semiconductors to the US. Moreover, India’s import duty on semiconductors is already zero, meaning there are no reciprocal tariff concerns,” he said in a statement on Thursday.
He said that the most of India’s upcoming semiconductor manufacturing and Outsourced Semiconductor Assembly and Test (OSAT) facilities cater to global brands. India’s increasing domestic semiconductor demand will rely on locally manufactured chips, minimising reliance on imports.
“In the long run, Indian semiconductor brands will not be at a major disadvantage, as the US tariff is expected to apply uniformly to all exporting nations,” he said.
Impact on US consumers
A 25 per cent tariff will significantly increase the cost of semiconductors imported into the US, particularly from Taiwan, South Korea and China, which dominate the global chip manufacturing space.
The additional costs, Chandak said, will likely be passed on to consumers, making smartphones, laptops, electric vehicles and industrial electronics more expensive.
Companies that depend on semiconductor imports, such as Apple, Nvidia and Tesla will face increased production costs, potentially leading to reduced profit margins or higher consumer prices.
“Things are moving at a breathless pace with day-to-day changes in the US administration’s stance on international trade. What is clear is that their preference is to deal with a bilateral, country-to-country approach, with multilateral trading blocs taking a back seat. Reciprocity and retaliation are the order of the day. The considered approach to take right now is to just keep all options open,” Nitin Bajaj, Chief Operating Officer of NeoLync, said.
‘Operate locally’
Yugal Joshi, Partner with Everest Group, felt that India’s semiconductor industry does not have much scale or global impact to feel worried about these tariffs. “Given that the US is the largest market for semiconductor consumption, companies do not have much leeway, but to agree and align with this,” he said.
“Theoretically, companies may want to offset this cost increase by investing in India to build chips for other regions. However, India lacks such maturity in chip design, manufacturing and supply chain,” he said.
“The key risk is some chip companies who wanted to invest in India may not get compelled to invest in manufacturing in the US now, which can reduce the investment pie available for India,” he said.
“I think we must go and evaluate each specific case independently and then make those assessments. But our philosophy is to operate locally,” Santhosh Viswanathan, Vice President and Managing Director (India Region) of Intel Corporation, said.
“We must rely on the rules of the land, so that’s the mode we will look at. As some of these policies pan out, we will look at the issues and how we can service our customers and markets better in that environment,” he said.
(with inputs from Sanjana B in Bengaluru)
