The new U.S. tariff policy could lead to annual losses of over $1 billion for chip equipment manufacturers, affecting companies such as Applied Materials.

The new tariff policy drafted by the U.S. government could cause domestic semiconductor equipment manufacturers to lose more than $1 billion annually, as estimated in closed-door meetings with industry leaders and officials. Applied Materials, Lam Research, and KLA each anticipate losses of approximately $350 million, while mid-sized companies such as Onto Innovation are also expected to incur costs in the tens of millions of dollars. The losses include order cancellations, supply chain adjustments, and compliance costs, indicating the significant impact of the tariff policy on the high-tech manufacturing sector.

Background of Tariff Policy and Industry Response

In April 2025, President Trump announced the initiation of an import investigation on semiconductor products and equipment to assess their potential threat to national security under Section 232 of the Trade Expansion Act. This move is seen as a prelude to imposing tariffs on the semiconductor industry. Although the Trump administration temporarily exempted smartphones, laptops, and some electronic products from retaliatory tariffs, the White House made it clear that these exemptions are only temporary measures and may be included in the tax scope in the future.

Against this backdrop, the U.S. Semiconductor Equipment and Materials International Association (SEMI) and several industry representatives held intensive talks with government officials in Washington last week to clarify policy directions and express industry concerns. According to participants, the industry initially estimates that if the new tariffs are fully implemented, chip equipment manufacturers will lose more than $1 billion annually.

Major Financial Pressure on Three Leading Equipment Manufacturers

According to reports from Reuters and the United Daily News, three leading U.S. chip equipment manufacturers—Applied Materials, Lam Research Corporation, and KLA—each estimate facing losses of about $350 million due to the new tariff policy. These losses mainly arise from the following factors:

• Loss of Export Orders: Especially in overseas markets for lower-end equipment, where price competitiveness declines, leading to orders shifting to other suppliers.
• Supply Chain Transformation Costs: To cope with the tariff policy, companies need to find alternative component suppliers outside of China, involving redesign, testing, and certification processes.
• Compliance and Personnel Expenditures: To comply with new tariff regulations, companies need to hire additional legal and compliance personnel and establish new customs and tax processing mechanisms.

Additionally, mid-sized companies like Onto Innovation also estimate an increase in additional expenditures by tens of millions of dollars. Since chip manufacturing equipment typically consists of hundreds to thousands of high-precision components, the supply chain is highly complex, and transformation costs are difficult to underestimate.

Impact of Ongoing Export Controls from the Biden Era

In fact, U.S. chip equipment manufacturers have already faced revenue pressure from export restrictions during the Biden administration. Since 2022, the U.S. government has implemented export controls on advanced chip manufacturing equipment, restricting their export to China to prevent their use in military and artificial intelligence applications. According to reports from Reuters and the China Times News Network, these measures have already resulted in the loss of billions of dollars in orders for the industry.

Now, as the Trump administration further pushes tariff policies, the industry fears that existing pressures will be exacerbated. Especially for the export market of lower-end equipment, which previously maintained a certain sales volume, it may now also be lost due to tariffs.

Uncertainty in Tariff Estimates and Industry Challenges

Although the current loss estimate is $1 billion, industry insiders emphasize that this is only a preliminary estimate, and the actual impact may be greater. Since each chip manufacturing equipment involves hundreds of components, and the final taxed products and rates are not yet clear, companies find it difficult to conduct precise financial planning.

Applied Materials has yet to comment on this, while KLA and Lam Research have declined to respond to media inquiries. The SEMI association stated that it will continue to communicate with the government to seek policy adjustment space.

Chain Reaction in the Industry and Supply Chain Restructuring Pressure

The predicament of chip equipment manufacturers is not limited to direct financial losses. As these companies are located upstream in the semiconductor supply chain, their rising costs may further transmit to wafer foundries and IC design companies, ultimately affecting the overall cost structure and product prices of the technology industry.

Furthermore, if companies decide to move some production lines back to the U.S. to avoid tariffs, they will face enormous capital expenditure and human resource challenges. According to Yahoo Finance, some Asian companies have begun to reassess their export strategies to the U.S., even considering setting up factories in the U.S. to respond to policy changes.

References

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