How Tariffs Could Disrupt Semiconductor Supply Chains and Operations

Lately, all eyes have been on U.S. trade policy. In recent months, the threats and implementations of tariffs on products from Canada, Mexico and virtually every other country — introduced by the Trump administration — have raised concerns across multiple industries.

While not all tariffs are inherently disruptive, some sectors may be hit harder than others. In the case of semiconductors, investors and the broader public place significant attention on tariffs affecting imports from China, Taiwan and other East Asian manufacturing hubs. However, policies targeting Mexican products could trigger underappreciated reactions across the semiconductor supply chain.

Why Mexico Matters

Historically, much of the focus on semiconductors has centered on products originating in East Asia, with particular attention to early- and late-stage supply-chain dynamics. However, in today’s global landscape, tracking only the end-market or East Asian operations no longer provides a complete picture of industry activity.

Mexico-based operations play a key role in midstream supply chain activity, according to research by M Science. Tracking the growing influence of nearshoring dynamics in Mexico provides an essential perspective for understanding the semiconductor import/export ecosystem.   

Many semiconductor products are routed to Mexico for manufacturing or packaging, then exported to the U.S. or utilized in other global markets. Over the past several years, Mexico has played a pivotal role in the supply chain, especially within the automotive and mobile verticals of the broader semiconductors market. Major players such as Skyworks, Texas Instruments, Infineon Technologies, NXP Semiconductors, Avnet and Mouser Electronics all maintain significant operations in Mexico.

Why Mexico?

Several factors are driving this strategic shift. In addition to its proximity to the U.S., Mexico offers a highly skilled labor force and remains price-competitive for international companies.

Automotive manufacturers have long maintained a significant presence in Mexico, transforming it into a key manufacturing hub in North America. Texas Instruments, for example, operates a facility in Mexico where it imports, assembles and tests semiconductor products. Once completed and vetted, those products are sold to automotive manufacturing clients within Mexico.

This relationship is a crucial link in the global automotive semiconductor supply chain, especially given the scale of the U.S. auto market. A similar process also exists in the mobile semiconductors industry.

Semiconductor Import and Export Trends  

When evaluating global operations, a company’s import and export activity can (1) serve as a leading indicator for revenue and (2) offer valuable insight into supply-chain dynamics. This is especially important amid ongoing macroeconomic pressures, a rapidly changing trade backdrop in response to tariffs, and continued supply-chain disruptions.

Import data can expose activity related to unfinished products, such as B2B transactions, and provide a glimpse into a company’s revenue further up the supply chain. Export data, on the other hand, tends to offer more straightforward visibility into revenue. For semiconductor companies with a significant presence in Mexico, analyzing import/export flows can help illustrate the timeline for assembling finished components and the pace of shipments into the U.S.

Comparing major semiconductor manufacturers and suppliers with a significant presence in Mexico, year-over-year dollar declines worsened in early 2025 for both Mexican semiconductor imports and exports — though import volumes held up better than exports.

The question now is: How will new U.S. trade policies impact these import/export trends moving forward, and what might that signal for broader shifts in end- and mid-market pricing and demand?

A Reshaping of the Semiconductor Industry 

The 2025 economy has already experienced volatility due to the prospect and implementation of new and expanded tariffs, as well as greater uncertainty surrounding global and U.S. trade amid rapidly changing tariff expectations.

Many U.S. tariffs are not entirely new. Several measures introduced during the first Trump administration were left in place — and in some cases, expanded — by the Biden administration.

In mid-April, the U.S. Commerce Department announced an investigation into whether semiconductor imports could pose a national security threat. Earlier in the month, President Donald Trump implemented a new round of tariffs targeting imported automobiles, for which many semiconductors are key components. While these policies could potentially boost long-term interest in U.S. semiconductor and automotive manufacturing, the short-term implications may place added strain on the semiconductor industry.

One main concern is the potential for supply-chain disruption — a scenario with historical precedent. When the U.S. previously imposed harsher tariffs on China, many companies responded by realigning their supply chains to include other East Asian manufacturing hubs.

Until recently, trade within North America had been relatively fluid and unrestricted. However, with 25-percent tariffs on automotive imports, companies with operations in Mexico will need to reevaluate their business strategies. Exporting products from Mexico to the U.S. will now incur additional costs, which are likely to trickle down to consumers.

Should pricing on big-ticket items like vehicles become more expensive, consumer demand could be impacted — potentially shifting how and where discretionary spending is allocated. This dynamic could play out across sectors, with particular acute effects in the automotive market. If end-market demand declines, it could have a direct impact on the semiconductor manufacturers that supply the automotive sector.

In the long term — and assuming changes in trade policy become permanent — tariffs may prompt companies to (1) shift aspects of their supply chains toward countries with more favorable U.S. trade agreements or (2) invest in building factories on U.S. soil. However, such a transition would take considerable time, as semiconductor fabrication requires significant infrastructure and capital investment. This type of strategic shift also requires a certain level of confidence or clarity about the future state of trade policy.

Potential Trade War Winners and Losers

Several companies are better positioned than others, depending on current free trade dynamics. Success often hinges on supply-chain resilience and diversification, both of which tend to correlate with company scale.

Take Texas Instruments, for example. With operations all over the world, the company is well-equipped to respond more flexibly to shifts in supply chains, tariffs and other macroeconomic elements. In contrast, smaller operations maintain a heavier concentration of operations in Mexico, making it potentially less agile in the near- to medium-term. A significant share of its head count and property, plant and equipment (PP&E) is tied to a single location, which limits a smaller company’s ability to pivot quickly.    

Many companies may already be bracing for impact amid these ongoing policy shifts. While our research shows month-to-month movement, it may be too early to determine whether these changes signal broader shifts across the industry.

(Image credit: Getty Images/Vladimir Tyurin)