Trump Moves to Mandate 1:1 Domestic-Imported Chip Ratio
US President Donald Trump’s administration is planning to significantly reduce Washington’s reliance on foreign-made semiconductors, aiming to boost domestic production and reshape global supply chains. The administration aims to have chip companies in the US manufacture the same number of semiconductors as their customers import from overseas. Further, the companies that won’t be able to maintain the 1:1 ratio over a period of time will have to pay a tariff. The plan stems from Trump’s remarks made last month that technology companies, which will invest more in the US, can avoid a tariff of about 100 per cent on semiconductors, the report said, citing sources. However, matching the domestic chip capacity with the chip imports could be challenging than simply boosting investment, since overseas products are often cheaper, supply chains are complex, and expanding production in the US could take time.
However, if implemented, the policy could further add complications to the already intricate tariff regime. Under the system, a company that pledges to produce one million chips in the US will be credited with that amount over time, thereby allowing it and its customers to import without tariffs until the new plant is operational, the report states. At the start of the process, companies are likely to be provided with relief to adjust and build US capacity. However, the system could pose challenges for tech firms like Apple and Dell Technologies, which import products containing multiple chips from across the world. On the other hand, it could benefit companies like Taiwan Semiconductor Manufacturing Co. (TSMC), Micron Technology, and GlobalFoundries by strengthening their position in negotiations with customers. Under the new system, tech firms would be required to track the origin of all chips and coordinate with manufacturers to balance the domestic and overseas production. Commerce Secretary Howard Lutnick discussed the plan with the semiconductor industry executives, adding that the 1:1 ratio might be needed to ensure economic security.
For years, administration officials have expressed concern that tech firms in the US rely too heavily on chips made overseas, especially in Taiwan, which lies just 80 miles from mainland China and is viewed as vulnerable to Chinese aggression or natural disasters that could disrupt global supply chains. According to the report, tech executives in the US are focused on this issue since semiconductors are integral to the modern economy and power everything from smartphones to cars. Chips made in the US are often shipped abroad for assembly into finished products and then re-imported as components, complicating tariff enforcement. How tariff values would be calculated for such products remains unclear, and the plan is still subject to change.
White House spokesman Kush Desai said, “America cannot be reliant on foreign imports for the semiconductor products that are essential for our national and economic security”, adding, “Unless officially announced by the administration, however, any reporting about our policymaking should be treated as speculative”. The new plan of a 1:1 ratio is part of the Trump administration’s strategy to address the issue, leveraging the threat of tariffs to push companies to source more US-made chips.
