U.S. Trade Tribunal's New Proceeding on Apple Watch Import Ban: Assessing Long-Term Valuation Impact on Tech Supply Chains and Semiconductor Exposure

The U.S. International Trade Commission (ITC) has reignited a high-stakes legal battle by initiating a new proceeding to determine whether Apple's updated Apple Watches infringe on Masimo's patents related to blood-oxygen measurement technology according to Reuters. This development follows a 2023 ruling that blocked imports of Apple's Series 9 and Ultra 2 models, forcing the company to temporarily remove the contested feature. While Apple reintroduced the Blood Oxygen function in August 2025 after securing approval from U.S. Customs and Border Protection, Masimo has contested this decision in court and is pursuing a $749 million damages claim in a California federal jury trial according to Economic Times. The ITC's investigation, expected to conclude within six months, could reshape not only Apple's product strategy but also the valuation dynamics of its semiconductor supply chain.

The Semiconductor Supply Chain at Risk

Apple's smartwatches rely on a complex network of semiconductor suppliers, including companies specializing in sensors, microchips, and power management systems. A potential import ban could disrupt demand for these components, particularly for firms supplying blood-oxygen measurement technology. For instance, ON Semiconductor, a key player in sensor and power solutions, has seen its valuation fluctuate amid trade uncertainties. Over the past year, ON's shares have declined by 20.2% due to muted demand and inventory challenges according to Nasdaq, despite strategic partnerships in AI infrastructure and electric vehicles according to Zaman.

The ITC's rulings often have cascading effects on semiconductor valuations. Historical data from 2023–2025 shows that tariffs and trade tribunal decisions have led to triple-digit tariffs on semiconductor materials like gallium and germanium, critical for chip production. While the U.S. Commerce Department paused some tariffs in April 2025 to assess national security implications, the sector remains vulnerable to regulatory shifts. For example, ON Semiconductor's Q3 2025 earnings, though exceeding expectations, saw a 1.9% pre-market stock dip, underscoring the sector's sensitivity to trade-related volatility according to Investing.com.

Strategic Reconfigurations and Resilience

Semiconductor firms are adapting to mitigate risks. Companies like ON Semiconductor are diversifying supply chains, relocating manufacturing to non-tariffed regions, and investing in high-growth areas such as AI and EVs according to McKinsey. These strategies aim to offset potential losses from trade disruptions. However, the Apple-Masimo dispute highlights a unique challenge: patent litigation can directly impact component demand. If the ITC rules against Apple, suppliers of blood-oxygen sensors may face reduced orders, while those providing alternative technologies could see increased demand.

The broader semiconductor industry's resilience is also tied to innovation. Frencken, a supplier in industrial automation and medical tech, reported an 8.1% year-on-year revenue increase in Q3 2025, driven by Asia's recovery and demand for advanced sensors according to Business Times. This suggests that firms with diversified product portfolios and strong R&D pipelines may outperform peers in volatile markets.

Long-Term Implications for Investors

For investors, the Apple-Masimo case underscores the need to monitor both legal outcomes and supply chain dynamics. A prolonged ban could pressure Apple's market share, indirectly affecting semiconductor suppliers. Conversely, a favorable ruling for Apple might stabilize demand for its partners. However, the sector's exposure to trade policies and geopolitical tensions remains a wildcard.

The ITC's decision in this case could set a precedent for how patent disputes influence semiconductor valuations. Given the sector's historical volatility-exemplified by ON Semiconductor's 19.21% revenue decline in September 2024-investors should prioritize companies with robust cash reserves, diversified client bases, and strategic alignment with growth sectors like AI and renewable energy.

Conclusion

The U.S. Trade Tribunal's proceeding on the Apple Watch import ban is more than a legal dispute-it is a litmus test for the semiconductor industry's adaptability. As trade policies and patent battles continue to shape the sector, firms that balance innovation with supply chain resilience will likely emerge stronger. For investors, the key lies in navigating short-term uncertainties while capitalizing on long-term trends in technology and global trade.