Geopolitical Risk and Semiconductor Supply Chains: Implications for Tech Equity Investments

A map of the global semiconductor supply chain, highlighting key regions such as the United States, China, and North America, with arrows indicating trade flows and policy-driven shifts in manufacturing hubs.

The semiconductor industry has become a battleground for geopolitical strategy, with national security policies in 2025 reshaping global supply chains and creating both risks and opportunities for tech equity investors. As governments prioritize self-sufficiency and resilience, the sector is undergoing a transformation that demands a nuanced understanding of policy dynamics, regulatory hurdles, and corporate adaptability.

National Security Policies Reshape the Semiconductor Landscape

The U.S. Congress's passage of the Securing Semiconductor Supply Chains Act of 2025 underscores a strategic shift toward domestic manufacturing. By coordinating with state-level economic development organizations, the law aims to attract foreign direct investment while addressing vulnerabilities in the supply chain, according to a Brookings analysis. Simultaneously, the Department of Commerce's Section 232 investigation into semiconductor imports has intensified scrutiny of foreign dependencies, particularly on China, as a CNAS commentary argues.

However, the Trump administration's reassessment of the CHIPS and Science Act-enacted in 2022-introduces uncertainty. While the law initially spurred $500 billion in private-sector investments, the administration is now renegotiating contracts and removing provisions tied to diversity, equity, and inclusion, as a National Law Review analysis reports. For example, the analysis notes that Intel's funding agreements have been modified to eliminate workforce requirements in exchange for government support. These changes reflect a broader deregulatory agenda, including the revocation of Biden-era AI executive orders, aimed at reducing compliance burdens on tech firms.

Investment Opportunities in a Fragmented Global Market

Despite regulatory headwinds, the semiconductor industry is projected to grow by 11.2% in 2025, reaching $701 billion in global sales, driven by demand for AI chips and 5G/6G infrastructure, according to a 2025 industry report. The U.S. is leveraging this momentum through initiatives like the ITSI Fund under the CHIPS Act, which fosters a North American semiconductor ecosystem with Mexico and Canada. Arizona State University's workforce development programs and Mexico's infrastructure reforms exemplify this collaborative approach, as the Brookings analysis highlights.

Investors are also capitalizing on regional opportunities. For instance, TSMC and GlobalFoundries are expanding U.S. facilities with federal and state incentives, signaling confidence in the domestic manufacturing renaissance, the 2025 industry report finds. Meanwhile, the Trump administration's Project Stargate-a $500 billion initiative-aims to further stimulate domestic production through tax cuts and deregulation. These efforts align with bipartisan support for tripling U.S. semiconductor production capacity by 2032, a goal tied to generating 500,000 jobs, according to the 2025 industry report.

Navigating Risks: Tariffs, Regulations, and Geopolitical Tensions

The same policies driving growth also introduce volatility. The administration's 20% tariff on Chinese goods and 25% tariff on Canadian and Mexican products (excluding USMCA-covered items) risk disrupting supply chains and inflating costs for consumer electronics. Additionally, evolving environmental regulations like the EU's REACH and U.S. TSCA have increased production costs, with compliance documentation requirements adding operational complexity, as a Sourceability piece documents.

Geopolitical tensions further complicate the landscape. While the U.S. delays TikTok's shutdown to facilitate its sale, it simultaneously reevaluates export controls on AI chips and cloud access. These measures aim to balance national security with economic interests but could exacerbate trade frictions with China and Europe, leading to a more fragmented global market.

Strategic Implications for Investors

For tech equity investors, the semiconductor sector presents a duality of high-growth potential and regulatory risk. Companies like Intel and TSMC, which are central to U.S. manufacturing ambitions, offer exposure to government-backed projects but face scrutiny over compliance and geopolitical alignment. Conversely, firms specializing in AI-driven chip design or green manufacturing may benefit from deregulation and tax incentives.

A bar chart comparing global semiconductor sales from 2024 ($630.5 billion) to 2025 ($701 billion), with annotations highlighting AI and 5G/6G as growth drivers.

Conclusion

The interplay of national security policies and semiconductor innovation in 2025 is redefining the industry's trajectory. While U.S. initiatives like the CHIPS Act and ITSI Fund are fostering domestic resilience, they also introduce regulatory and geopolitical uncertainties. Investors must weigh these factors against long-term growth drivers such as AI demand and strategic partnerships. As the sector evolves, a balanced approach that leverages policy tailwinds while hedging against fragmentation will be critical for navigating this high-stakes landscape.