A sense of relief is sure to have spread across Ireland’s tech and semiconductor sector when the Trump administration abruptly decided to exempt them from its grand tariffs plan.
But that feeling of relief was to be short-lived.
Just two days later, US Commerce Secretary Howard Lutnick made clear that the exemption represented more of a respite than a reversal – and that sector-specific tariffs were on their way. Worse still, these would be separate to its reciprocal tariffs – in other words, they would not be up for negotiation.
It is, of course, unwelcome news for the sector. But until the White House gives more details, it’s created confusion more than anything else – not least around how tariffs will be levied.
“The supply chain is just incredibly complex,” says John Blake, general manager of MIDAS – the industry association for Microelectronics and Electronic Systems Design in Ireland. “Somebody spoke at our conference and tried to draw on a map to tell that supply story… and he basically had this spiderweb of lines across the global.”
That’s because the semiconductor industry is perhaps the perfect poster child for globalisation.
A chip may be made in a factory in Ireland, for example, but the rare earth materials that went into probably came from somewhere like China or Australia. And the disc-like wafer that comes out of the Irish factory might then go to somewhere like Poland to be cut down into individual chips. Those individual components might then travel again – to somewhere like Malaysia – to be tested, before being shipped to a factory in India or China to be embedded into a smartphone or a computer. And then, finally, that completed device (chips and all) would be shipped back to Europe, or the US, to be sold to a consumer or business.
And that’s not to mention all of the research and development work that would have taken place to design the chip in the first place – something which may have been done over many years, across multiple countries and R&D centres.
“Apple sometimes say that they make their own chips – they design their own chips but they’re actually made in the Far East; and the piece of silicon could be placed in the package with the pins that go into the motherboard somewhere else,” says Dr Kevin Berwick, lecturer at the School of Electrical and Electronic Engineering at TU Dublin. “So the question as to where something is made is actually quite a complex question.”
And as a result of that, identifying where the value of a semiconductor is – and how tariffs might be applied – is no easy thing. Hence the added uncertainty that has been created by the Trump administration’s promise of sector-specific charges. And this all comes at a time when the industry is already in a state of flux – highlighted by Intel’s announcement this week that it would cut jobs across its global operations as it tries to streamline its organisation.
To fab or not to fab
Intel’s move is unrelated to the tariff threat – but it does point to the dramatic reordering that’s taken place in the industry in a relatively short period of time. Once the undisputed king of computer chips, Intel now finds itself playing second fiddle to AI-experts Nvidia at the higher end of the market. Meanwhile it has been left behind in the smartphone and tablet space – with even laptops and desktop computers now increasingly turning towards alternative chip types.
Underlying this change has been the dramatic growth of so-called fab-less chip-makers. These are semiconductor companies that design chips but then – unlike Intel – outsource the actual manufacturing of the silicon to a third party. Nvidia is an example of this – so too is AMD, Qualcomm and Apple.
“There are some slight trade-offs but I think you do have more optionality and that’s part of the attraction,” says Jason Lynch, CEO of Equal1, a fab-less Irish semiconductor company that’s developing chips capable of quantum computing. “You’re not tied to that massive investment [of building a factory] and then the fabs can pool all of the designs together.”
And it’s not just through companies like Equal1 that Ireland has benefitted from the dramatic growth of fab-less semiconductor firms. Major fab-less players like Qualcomm, AMD and ARM also have operations here – not to mention other indigenous players like Altratech. Adding them onto the roughly 5,000 people Intel employs here, and the 1,500 Irish staff Analogue Devices has, the total semiconductor industry is estimated to have more than 20,000 workers in Ireland.
This comes as demand for semiconductors is exploding – and not just because of the rising need for the likes of smartphones and laptops. Today pretty much every consumer device – from washing machines to LED bulbs – contains a bundle of computer chips. Your average modern car – even a basic, petrol model – likely has upwards of 1,500 chips hidden within its frame.
But while Ireland punches well above its weight, it still lags far behind the sector’s global leader. Though, in fairness, so does everywhere else. Because as beneficial as the fab-less model has been to the sector here, it’s Taiwan that has benefitted the most from it. It is home to the companies that tend to do the chip-making on behalf of firms like Nvidia and Qualcomm – with its industry accounting for around 68% of the global market. TSMC (Taiwan Semiconductor Manufacturing Company) alone churns out tens of millions of chips per year.
And it’s this overseas dominance of a vital sector that the Trump administration wants to see change. Speaking on ABC News earlier this month, Howard Lutnick said bringing semiconductor manufacturing to US shores was a matter of national security.
And, in this respect, he’s actually likely to find some support – among both US Democrats and even EU officials.
In it for the long, long term
After supply chains seized up during the pandemic, and the flow of tech from Asia turned to a trickle – both the Biden administration and European Commission realised how vulnerable their industries were to global shocks. In response both sides – separately – launched programmes to encourage more local semiconductor manufacturing; though this was largely done through the promise of billions of euros of supports for the companies that promised to build new factories.
Now the Trump administration is dropping the carrot and picking up the stick – though there are doubts about how fruitful this new approach will be.
“Even if a fab – or multiple fabs – were announced [today], none of them would be producing silicon by the time the next president arrives,” says Dr Berwick. “The constants in this are much, much longer than the US presidency.”
Just like the supply chains that power the industry, semiconductor factories are extremely complex (and extremely expensive) things.
Intel held the official opening of its cutting edge ‘Fab 34’ facility in Leixlip in September 2023 – which was part of a €17 billion investment by the US firm. But that was roughly four years after the company had secured planning permission for the new factory, which in turn came after years of back and forward with the council and An Bord Pleanála. And – even though the ribbon was cut a year and a half ago – work is still being done to this day to fully fit out the facility.
“They’re still ramping up internally,” says John Blake. “It’s not like it’s been at 100% production on day one – it’s still not even at 100% production.”
In other words, no tariffs – or even hefty cash incentives – can possibly boost semiconductor manufacturing in the US in the short to medium term. Even if firms announce their intention to move their factories there as quickly as they can. Not that anyone realistically expects that they will – companies are also unlikely to abandon the expensive plants and plans in order to suit a political headwind that may only last for a few years.
And there are some other, even more practical roadblocks in the way of the US dream of pulling in more of these factories. Because alongside all of the time and money that they require, semiconductor facilities also need to be built in a very particular way. That means there needs to be the right equipment and expertise available.
“There’s a whole construction sector and services support around the big factories that’s very significant… that’s a capability that has developed that is marketable, even internationally,” says John Blake. “There’s an overlapping skill set there that’s applicable to data centres, applicable to advanced semi-conductor factories, but also clean rooms for pharma.
“There’s a whole continuum of skills there.”
And even after the years have passed and the billions have been spent, companies then need the expertise to run the factory itself.
Again, this is an area where Ireland holds an edge. The likes of Intel has been in Ireland for more than three decades, and some of the engineers working there have built up a knowledge base that would be hard to find anywhere else in the world. That’s not something any company would be keen to turn its back on.
“Some of the most highly skilled staff in various aspects of semiconductor manufacturing in the world – not just the best in Ireland, but in the world – are in Ireland,” says Dr Berwick. “Intel are going to be very, very reluctant to drop because it’s going to be a long, slow process to build that up anywhere else – even in America.”
There are also deep and long-standing links between the industry, academia and Government here. That has allowed universities to better tailor related courses to the needs of the sector, so that new graduates are as up-to-speed as possible once they start their careers. And that existing staff are continually upskilling to remain at the top of their game.
“The supply of talent is hugely important for the sector,” says Mr Blake. “It’s not enough to just hire them and think they’re good enough for the next 30 years or whatever, you’ve got to keep updating their skill sets as well.”
Beyond talent and upskilling, those links with academia has also given manufacturers access to multiple fruitful research partnerships through the years, which have in turn become lucrative products and features for the companies.
Putting a monetary value on that is easier said than done.
And while the Trump administration might argue that ‘if you build it, they will come’, there is already evidence that the US industry would struggle to find the skills required to staff any new factories that are built.
“[TSMC] are opening a fab in Arizona at the moment and they were quite prescient because they recognised a couple of years ago that globalisation seemed to be fracturing and they decided to move some of their production into America to address that,” says Dr Berwick. “But they’ve already announced delays to opening that fab because of an inability to get a workforce to man it.”
The US semiconductor industry is expected to need 300,000 more engineers over the next five years, due to the increased activity that Biden’s CHIPS Act alone has sparked.
And this should all provide some comfort to the industry here.
Wait and see
While uncertainty remains around tariffs, there is little expectation that anything the Trump administration might do will lead to an exodus of companies from here.
It may, though, impact plans for any new facilities – possibly, counter to the Trump plan, in the US too.
“The uncertainty that’s been caused by all of this stuff – that’s going to affect investment decisions. So who knows how it plays out?,” says Mr Blake.
“There could be a wait and see approach taken on these fabs,” says Dr Berwick. “Decisions on building them depend on lots of other factors apart from tariffs – like the economic cycle.
“They always try and time them so they build during downturns and then sell the chips during good times – those factors might be of more importance than tariffs.”
In the meantime fab-less firms like Equal1 feel well-positioned to weather whatever storm may come in the immediate future.
“We have a very European flavour to our supply chain and many of the companies we’re working with are in Europe,” says Mr Lynch. “We would be strongly of the view that you should make this thing as free of friction as possible between economic partners… but if that doesn’t happen it’ll slow things down potentially.
“It could delay our ability to get these things to market as we could but, you know, we’ll deal with that.”
The fact that it is aiming to be at the bleeding edge of the industry also gives it some insulation from the impact of tariffs, he says.
“The nice thing about us and quantum computing is that it is quite a high [average selling price] and it’s delivering massive value,” he says. “So if there’s an extra 5% or 10% – it’s not like we’re selling a commodity. The likes of pharma companies would be buying one of these to develop the next drug – and there’s a massive amount of value unlocked.”
But even if there’s little expectation of an exodus of companies from Ireland, there is also an awareness that Trump’s trade policy may pose a challenge to the industry here – albeit in a less direct way.
“If you talk to any CEO in a company, when they look at their business, the growth of their business is going to be driven by how much the world economy is growing as much as anything else,” says Mr Blake. “So the strength of the overall economy has a knock-on effect on how well the semiconductor sector is going.
“When you look at trade barriers at that level, that’s going to hit the industry too.”
