Semiconductor Reshoring: Navigating U.S.-China Tensions Through Strategic Investments

The escalating U.S.-China trade war and tech decoupling are reshaping global supply chains, with semiconductors at the epicenter. As tariffs, export controls, and geopolitical risks intensify, investors should position themselves in U.S.-based semiconductor equipment firms and foundries poised to capitalize on domestic manufacturing reshoring—fueled by the CHIPS Act's $540 billion investment wave. Here's how to navigate this strategic opportunity.

The CHIPS Act: A Lifeline for Supply Chain Reshoring

The CHIPS and Science Act, signed in 2022, has become the cornerstone of U.S. efforts to reclaim semiconductor dominance. By mid-2025, $33.7 billion in grants and $5.85 billion in loans had been disbursed to 32 companies, with a further $8.3 billion allocated to R&D. The Senate's proposed tax credit expansion—from 25% to 30% for eligible investments—adds urgency, incentivizing construction starts by late 2026.

This funding is reshaping the industry: Intel's $7.86 billion Ohio facility, TSMC's $65 billion Arizona complex (expanding to $165 billion post-renegotiation), and Micron's $6.1 billion New York DRAM plant are just the beginning. These projects aim to reduce reliance on Asian supply chains, particularly China, which currently dominates 80% of advanced chip manufacturing capacity.

Semiconductor Equipment: The Unsung Heroes of Reshoring

The backbone of semiconductor manufacturing is the equipment that builds it. U.S.-based firms like Applied Materials (AMAT), Lam Research (LRCX), and KLA Corp (KLAC) are critical to reshoring efforts. These companies supply deposition systems, etch tools, and metrology solutions—machinery that enables chipmakers to build everything from AI accelerators to automotive sensors.

Investors should prioritize these firms for two reasons:
1. Direct CHIPS Act Synergy: Equipment vendors are integral to foundries' capital expenditures. For instance, TSMC's Arizona fab will require billions in equipment purchases from U.S. firms.
2. Geopolitical Tailwinds: As export controls on advanced chips (e.g., the Commerce Department's July 2023 AI chip restrictions) tighten, domestic demand for equipment will surge to avoid reliance on Chinese suppliers.

Foundries and Foundry-Adjacent Plays: Where the Money Flows

The CHIPS Act's largest beneficiaries are the foundries themselves, which are building out U.S. capacity. Intel (INTC), though grappling with leadership shifts, remains a linchpin with its $100 billion investment plan and the $3 billion “Secure Enclave” defense project. TSMC (TSM), despite labor and logistics hurdles, is on track to produce 4nm chips in Arizona by mid-2025, with 2nm plans by 2030.

Other plays include:
- GlobalFoundries (GFS): Secured $1.5 billion for New York and Vermont facilities, focusing on essential 12nm+ nodes for defense and automotive.
- Texas Instruments (TXN): Its $1.6 billion legacy-node fabs in Texas and Utah address critical shortages in analog chips, a sector where China's influence is weaker.
- Advanced Packaging Leaders: Amkor (AMKR) and GlobalWafers (GWW) are expanding U.S. packaging and wafer facilities, reducing reliance on Taiwan's dominance in this segment.

Risks and Considerations

• Overcapacity Risks: A $540 billion spending spree could lead to excess supply, especially if global demand softens. Monitor utilization rates and pricing power.
• Policy Volatility: While the CHIPS Act enjoys bipartisan support, the Trump administration's renegotiation of terms (e.g., TSMC's $100 billion upsize) adds uncertainty.
• Execution Hurdles: Labor shortages (TSMC's reliance on Taiwanese workers), yield issues (Samsung's 2nm delays), and delays in EUV tool delivery (ASML's lead times) could stall progress.

Investment Strategy: Focus on Diversification and Tax Incentives

1. Core Holdings: Buy into equipment stocks like AMAT, LRCX, and KLAC. These firms benefit from both CHIPS Act-funded construction and long-term reshoring trends.
2. Foundry Plays: Intel and TSMC are speculative but high-reward bets if they can execute on timelines. Diversify with smaller names like GFS and TXN for stable legacy-node demand.
3. R&D and Subsidy Winners: Micron (MU) and Semiconductor Research Corp (SRC) are well-positioned for R&D grants and AI-driven memory demand.

Conclusion: A Decade-Long Opportunity

The U.S.-China tech decoupling is a multi-year trend, and semiconductor reshoring is its most tangible manifestation. Investors ignoring this shift risk missing out on a decade-long boom in domestic manufacturing. By focusing on equipment vendors, foundries with strong CHIPS Act ties, and R&D-driven innovators, portfolios can capture the upside while mitigating geopolitical risks. As the Senate's tax credit expansion shows, the U.S. is doubling down on self-reliance—the smart money is following.

Josh Nathan-Kazis is a pseudonym for the author of this article.