Semiconductor Shifts: Navigating the New Geopolitical Landscape of Tech Trade

The escalating U.S.-China trade conflict has reshaped the global semiconductor industry into a battleground of tariffs, export controls, and technological decoupling. As tariffs on Chinese semiconductors surged to 50% in 2025 and advanced manufacturing tools were banned from export, the supply chain has bifurcated: one path dominated by U.S. and allied tech, and another driven by China's self-reliance ambitions. For investors, this rupture presents asymmetric opportunities—specifically in firms with irreplaceable technological advantages or strategic exposure to the “splinternet” of chip ecosystems.

The U.S. has weaponized trade policy to curb China's semiconductor ambitions, starting with the Trump administration's Section 301 tariffs and accelerating under Biden's export controls. By 2025, over 300 Chinese entities—including SMIC, the country's leading foundry—were blacklisted for national security risks, effectively cutting them off from U.S. equipment and software. Meanwhile, reciprocal tariffs on semiconductors, initially spiking to 145%, were temporarily reduced to 30% in early 2025, but the core 50% Section 301 tariff remains intact.

The Decoupling Playbook: Winners and Losers

1. U.S./Allied Semiconductor Leaders: Prime Positions in the “Clean Tech” Supply Chain
Firms with advanced manufacturing capabilities or essential materials are poised to benefit as the U.S. and its allies enforce tech sovereignty. For instance:

• ASML Holding (ASML): The Dutch company's extreme ultraviolet (EUV) lithography machines are indispensable for producing advanced chips (7nm and below). Post-2023 export controls, ASML's sales to China collapsed, but demand from U.S.-aligned markets like Taiwan and the EU surged.
  

• Applied Materials (AMAT): A critical supplier of deposition and etching equipment, AMAT has seen its non-China sales rise as clients like TSMC and Intel expand U.S. and European capacity.

• Intel (INTC): Despite struggles in the foundry race, Intel's lobbying power and $100B U.S. chip subsidy (CHIPS Act) grants it a privileged role in rebuilding domestic manufacturing.

2. Materials and Specialty Chemicals: The Unsung Supply Chain Pillars
Semiconductor production relies on rare materials like high-purity silicon, fluoropolymers, and photoresists—industries dominated by U.S., Japanese, and European firms. Companies like Entegris (ENTG) and Lam Research (LRCX) supply critical consumables, and their dominance is unlikely to erode.

3. China's Dilemma: A Costly Leap Toward Autonomy
Chinese firms like SMIC and Huawei are now forced to rely on domestically sourced equipment and outdated manufacturing nodes (28nm or above), which are less competitive in AI, 5G, and high-performance computing. While Beijing's “Made in China 2025” push could yield breakthroughs over time, near-term profitability and global market share will suffer.

Investment Strategy: Allocate to Tech Sovereignty, Not Tariff Volatility

Investors should focus on firms whose value derives from irreplaceable technology or geopolitical necessity, not just short-term tariff impacts. Key recommendations:

• Buy U.S./allied semiconductor equipment and materials stocks (AMAT, LRCX, ENTG). Their dominance in critical tools insulates them from China's retaliation.
• Overweight foundry leaders with diversified supply chains, such as TSMC (TSM), which benefits from U.S. subsidies and reduced reliance on China for advanced node orders.
• Avoid Chinese semiconductor firms reliant on U.S. tech, including SMIC and memory manufacturers, unless they pivot to niche markets (e.g., IoT or legacy nodes) where trade barriers are lower.

The path forward is clear: the U.S.-China tech divide will deepen, creating winners in the “clean tech” supply chain and losers in the race to bypass sanctions. Investors who align with this strategic reshaping—not just the headline tariffs—will capture the asymmetric upside.

John Gapper's analysis emphasizes the need to prioritize firms with enduring technological advantages amid geopolitical fragmentation. The semiconductor sector is no longer a global race but a series of parallel tracks, and the winners are those who control the rails.