Rising Trade Tensions to Cause Price Hikes in Chip Supply Chains, Former Commerce Adviser Says
A recent rise in tariffs, export controls and other trade actions will lead to rising prices in semiconductor supply chains, said Sree Ramaswamy, former senior adviser to former Commerce Secretary Gina Raimondo.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Ramaswamy, speaking during a recent event hosted by the Center for Strategic and International Studies, said the “combination of tariffs, retaliatory actions, export control actions, and the restrictions on exports” of chips will “cause price increases and price spikes in that supply chain.” But he also said it’s not yet clear which portions of the chip supply chain will be hit the hardest and who will absorb those price spikes.
He noted that “nobody talked about neon” before Russia’s invasion of Ukraine, which was one of the world’s leading suppliers of neon, a crucial gas used in chip manufacturing. But after Ukraine was invaded in 2022, Ramaswamy said, “the price of neon went up sixfold, and you had all these semiconductor companies saying, ‘Oh, crap, we need neon.’”
Ramaswamy, who is now the chief innovation officer at non-profit NobleReach, predicted something similar will soon play out. “You're going to see that there are these nooks and crannies in these supply chains where suddenly prices are going to spike,” he said, while adding it’s impossible to tell who will be hit the hardest from those price increases.
“It could be companies like TSMC or Intel. It could be the hyperscalers. It could be Nvidia saying, ‘I'll absorb the price,’ or OpenAI. It could be somebody deep in the supply chain. It could be the consumers at the end of the day,” he said. “It's hard to predict, because you don't know what type of price increase is happening at what level of the supply chain.”
Ramaswamy compared the complexity of the global semiconductor supply chain to the automotive supply chain, citing a statistic that the average chip crosses international borders 70 times before reaching its final customer.
“I'm not sure how that analysis was done. I don't know if it's 70. But it gives you a sense” of the complexity, he said. “And so I would say anybody who says they have a crystal ball is smoking something which they should probably stop smoking. I don't think anybody knows how this is going to play out.”
Ramaswamy's comments came as the Trump administration announced new reciprocal tariffs against trading partners (see 2504020072), and as countries countered with their own duties or export restrictions (see 2504030057 and 2504040024). The Trump administration also is mulling how to change a Biden-era rule that could impose new export restrictions on advanced artificial intelligence chips (see 2503200002).