There was a collective sigh of relief when the US announced it wouldn’t impose tariffs on smartphones and computer equipment, but those tariffs aren’t disappearing. The US aims to bring manufacturing back home, and commerce secretary Howard Lutnik made that clear in an ABC News interview shared on social media.
He explained that Trump plans to introduce tariffs specifically targeting the semiconductor sector, which will include smartphones and electronic components for microchips. Lutnik emphasized the need for America to produce its own semiconductors and chips, stating, “We can’t rely on Southeast Asia.” While these products may be free from current reciprocal tariffs, Lutnik warned that soon they will face sector-specific tariffs. Citing national security concerns, he said, “We can’t be beholden to foreign countries for the fundamental things we need.”
Alvin Nguyen, a senior analyst at Forrester, discussed how these tariffs affect electronics manufacturers who depend on globally sourced semiconductors. He pointed out that the fluid nature of the tariff situation creates confusion in tracking the supply chain. In the medium term, he predicted that semiconductor companies would look to diversify their manufacturing locations to reduce reliance on Taiwan, which dominates chip production. This could lead to changes in datacenter investments as businesses adapt to evolving tariff costs and sovereignty laws for AI and data.
Traditionally, datacenter capacity planning has focused on predicting future needs for computing and storage. However, business leaders might now determine where to build based on economic considerations rather than just growth forecasts. This shift could significantly alter their strategies.
In the meantime, policymakers in the EU and UK aim to support local AI and cloud datacenter facilities. The EU’s approach acknowledges the high upfront costs of developing domestic chip manufacturing. Their Chip Act promises €43 billion in semiconductor investments through 2030. Mario Draghi’s report on European competitiveness also suggests a coordinated strategy for boosting domestic production and protecting key infrastructures. He argued for stronger innovation in semiconductors and enhancing Europe’s position in advanced chip segments.
Companies like Intel are already investing in geographically diverse manufacturing, including several fabrication facilities in Europe. A policy document published in October 2024 highlighted the EU’s significant investments in building a complete domestic semiconductor supply chain. In contrast, the UK’s semiconductor strategy allocates a modest £1 billion over the next decade, focusing mainly on intellectual property and compound semiconductors.
While compound semiconductors present growth opportunities for the UK, they differ from the high-performance chips needed for modern datacenter servers. However, they are crucial for powering the supply units of those servers. The adjustments in US trade policy could jeopardize the UK’s semiconductor strategy, which relies heavily on international collaboration. Without major investments or incentives to attract chip manufacturers to set up foundries in the UK, the country faces supply chain vulnerabilities and risks from upcoming US semiconductor tariffs.