Tariffs could cost US chip equipment makers up to $1bn annually

Toronto — US President Donald Trump’s new tariffs could cost US semiconductor equipment makers more than $1bn a year, according to industry calculations discussed with officials and legislators in Washington last week, two sources said.

Each of the three largest US chip equipment makers — Applied Materials, Lam Research and KLA — may suffer a loss of about $350m over a year related to the tariffs, the source said.

Smaller rivals such as Onto Innovation may also face tens of millions of dollars in extra spending.

The potential cost to the chip equipment industry and talks between industry executives and US officials over several days about those costs are reported here for the first time.

The companies build some of the world’s most highly sought-after chipmaking equipment that can require thousands of specialised parts.

Chip equipment makers have already lost billions in revenue after former US president Joe Biden implemented a series of export controls aimed at curbing the shipment of advanced semiconductor manufacturing equipment to Chinese entities.

The Trump administration has largely paused the “reciprocal” tariffs it announced in April. But to spur more US manufacturing, it is weighing further duties on the chip industry and initiated a probe into their imports on Monday.

The estimated costs discussed last week in Washington include lost revenue, primarily for missed sales of less sophisticated equipment to overseas rivals and the costs of finding and using alternative suppliers for the complex components of chipmaking tools. The estimate also includes tariff compliance costs, such as adding personnel to handle the complexities of following the rules.

Legislators and administration officials discussed the tariff costs with chip industry executives and officials from the SEMI, an international trade group, as part of the dialogue.

Applied Materials did not respond to a request for comment. KLA and Lam declined to comment.

The early estimate of $350m per company could change as the Trump administration’s duties take effect. Quick calculations are hard to make because each chipmaking tool has multiple components, and the ultimate tariff regime is unclear.

The Biden administration cracked down on China’s chip industry over three years to hobble its ability to produce cutting-edge chips used in artificial intelligence, military applications or other ways that could threaten US national security.

The US export controls have spurred China to invest in its domestic chip equipment industry.

Reuters