SINGAPORE: The United States' move to impose a 100 per cent tariff on semiconductor imports will likely hit chipmakers in Singapore, with potential knock-on effects for industries such as precision engineering and logistics, economists said.
US President Donald Trump on Wednesday (Aug 6) said that the new tariff rate will apply to all chips and semiconductors coming into the country, but would not apply to companies that had made a commitment to manufacture in the US or were in the process of doing so.
Still, those in the industry say it is early days and more information needs to be released before they make any business decisions.
The Singapore Semiconductor Industry Association (SSIA) said companies are aware of the announcement, but given the lack of “detailed policy guidance”, most are still assessing the potential impact.
“The general sentiment is one of cautious watchfulness, with concerns focused on supply chain disruption, rising costs, and unpredictability in global trade flows if the tariff is broadly applied,” said executive director Ang Wee Seng, whose association has over 300 member companies from the industry.
Singapore's Trade and Industry Minister Gan Kim Yong had in April cautioned that additional tariffs on the semiconductor and pharmaceutical sectors – if imposed by the US – could strain the global economy further.
"Taken together, these developments have caused significant uncertainty and downside risks to the global economy. And we must be prepared for more shocks and surprises and challenges going ahead," he said during a press conference by the Singapore Economic Resilience Taskforce.
Mr Ang noted that Singapore’s semiconductor industry is "deeply integrated into global value chains", with a significant share of its exports eventually reaching the US.
“While the exact proportion varies across companies and product segments, the US remains a key end market,” he said.
“If the proposed tariffs are implemented broadly, they may affect both direct exports and Singapore-based firms that are part of the global supply chain serving the US market.”
Economists said Singapore's role as a semiconductor hub means that the tariffs could have wider repercussions. Based on 2023 figures from the economic indicator database Trading Economics, about US$13.2 billion – or 29.3 per cent – of Singapore's exports to the US fall under electrical and electronic equipment, a broad category that includes semiconductors.
“At the headline level, this looks like bad news for key semiconductor manufacturing hubs, including Singapore,” said OCBC chief economist Selena Ling. “The impact of 100 per cent semiconductor tariffs is not negligible.”
She added there could also be ripple effects on other sectors, such as precision engineering – largely made up of small- and medium-sized enterprises (SMEs) – and logistics, particularly airfreight.
“The airfreight loads could be potentially affected too, since chips are usually sent by air,” she said.
FILE PHOTO: A general view of Infineon Technologies, a semiconductor producer, before a ceremony for Infineon's Smart Power Fab, in Dresden, Germany, May 2, 2023. REUTERS/Matthias Rietschel/File photo
Although Mr Trump indicated that the tariffs would not apply to firms committed to manufacturing in the US, experts said key questions remain about what constitutes a sufficient level of commitment.
“When does it kick in, does ground have to be broken (in the US), how long do you have to build until we know what are the exemptions from these tariffs? We don’t have an answer to that,” said expert on US politics and government Steven Okun, the CEO of sustainability and public affairs consultancy APAC Advisors.
Some jurisdictions have already declared that their companies will be exempt or get favourable tariff rates.
Taiwan’s parliament said chipmaker TSMC would be exempt due to its factories in the US, while a South Korean representative said Samsung Electronics and SK Hynix would also benefit from favourable terms under a trade deal with Washington.
Such exemptions may offer some relief to Singapore-based firms, especially those with US origins or facilities, said Mr Song Seng Wun, economic adviser at financial services provider CGSI.
“It depends on how they define American facilities, and whether or not chip assemblies done in Singapore for American firms are subject to the 100 per cent (tariff),” he said.
He noted that firms like Micron Technology, a US company with offices in Singapore, and GlobalFoundries, which operates in both Singapore and the US, could be affected differently depending on how rules are applied.
Analysts also raised questions around how semiconductors shipped indirectly to the US would be treated.
For example, if a semiconductor manufactured in Singapore is exported first to a neighbouring country to be assembled into an electronic item which is then shipped to the US, it is still not clear if the value of the semiconductor will be tariffed, Mr Okun said.
Mr Song added: “Donald Trump might think it’s quite straightforward, but the supply chain can be quite complex.”
Given the lack of clarity on who or what will face tariffs, semiconductor firms are adopting a wait-and-see approach.
“At this stage, there is limited detail on how this policy will be implemented, and we will need to wait for greater clarity before assessing its full implications,” said Mr Ang from SSIA.
CNA also contacted several semiconductor firms which operate in Singapore.
German chipmaker Infineon, which has a presence in Singapore, declined to comment on the tariff announcement, citing a lack of official documents.
OCBC's Ms Ling said further developments remain possible as other jurisdictions may respond with their own tariff measures.
“As what we have seen with the reciprocal tariff, the eventual semiconductor tariff level may well change and the firm exemption list may also evolve,” she said.
She added that Singapore's strong trade ties with the US could offer room for negotiations that may lead to more favourable outcomes.
“This is especially if Singapore can negotiate for some concessions, leveraging on its free trade agreements and strong economic cooperation with the US,” said Ms Ling.
Such negotiations could even position Singapore more favourably within the region.
“If some semiconductor firms pivot away from North Asia to Singapore, for example, this may provide some buffer,” she said.
SSIA said it remains in close dialogue with its member companies, government agencies and international partners.
“We will continue to facilitate information sharing, gather industry feedback, and support companies in evaluating risks and contingency planning,” Mr Ang said.
“The semiconductor industry has always adapted through complex shifts, and we remain confident that our ecosystem will rise to meet the challenges ahead.”
CNA has contacted the Ministry of Trade and Industry for comment.
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US President Donald Trump on Wednesday (Aug 6) said that the new tariff rate will apply to all chips and semiconductors coming into the country, but would not apply to companies that had made a commitment to manufacture in the US or were in the process of doing so.
Still, those in the industry say it is early days and more information needs to be released before they make any business decisions.
The Singapore Semiconductor Industry Association (SSIA) said companies are aware of the announcement, but given the lack of “detailed policy guidance”, most are still assessing the potential impact.
“The general sentiment is one of cautious watchfulness, with concerns focused on supply chain disruption, rising costs, and unpredictability in global trade flows if the tariff is broadly applied,” said executive director Ang Wee Seng, whose association has over 300 member companies from the industry.
Singapore's Trade and Industry Minister Gan Kim Yong had in April cautioned that additional tariffs on the semiconductor and pharmaceutical sectors – if imposed by the US – could strain the global economy further.
"Taken together, these developments have caused significant uncertainty and downside risks to the global economy. And we must be prepared for more shocks and surprises and challenges going ahead," he said during a press conference by the Singapore Economic Resilience Taskforce.
Related:
US REMAINS KEY MARKET
Mr Ang noted that Singapore’s semiconductor industry is "deeply integrated into global value chains", with a significant share of its exports eventually reaching the US.
“While the exact proportion varies across companies and product segments, the US remains a key end market,” he said.
“If the proposed tariffs are implemented broadly, they may affect both direct exports and Singapore-based firms that are part of the global supply chain serving the US market.”
Economists said Singapore's role as a semiconductor hub means that the tariffs could have wider repercussions. Based on 2023 figures from the economic indicator database Trading Economics, about US$13.2 billion – or 29.3 per cent – of Singapore's exports to the US fall under electrical and electronic equipment, a broad category that includes semiconductors.
“At the headline level, this looks like bad news for key semiconductor manufacturing hubs, including Singapore,” said OCBC chief economist Selena Ling. “The impact of 100 per cent semiconductor tariffs is not negligible.”
She added there could also be ripple effects on other sectors, such as precision engineering – largely made up of small- and medium-sized enterprises (SMEs) – and logistics, particularly airfreight.
“The airfreight loads could be potentially affected too, since chips are usually sent by air,” she said.
FILE PHOTO: A general view of Infineon Technologies, a semiconductor producer, before a ceremony for Infineon's Smart Power Fab, in Dresden, Germany, May 2, 2023. REUTERS/Matthias Rietschel/File photo
AMBIGUITIES AROUND EXEMPTIONS
Although Mr Trump indicated that the tariffs would not apply to firms committed to manufacturing in the US, experts said key questions remain about what constitutes a sufficient level of commitment.
“When does it kick in, does ground have to be broken (in the US), how long do you have to build until we know what are the exemptions from these tariffs? We don’t have an answer to that,” said expert on US politics and government Steven Okun, the CEO of sustainability and public affairs consultancy APAC Advisors.
Some jurisdictions have already declared that their companies will be exempt or get favourable tariff rates.
Taiwan’s parliament said chipmaker TSMC would be exempt due to its factories in the US, while a South Korean representative said Samsung Electronics and SK Hynix would also benefit from favourable terms under a trade deal with Washington.
Such exemptions may offer some relief to Singapore-based firms, especially those with US origins or facilities, said Mr Song Seng Wun, economic adviser at financial services provider CGSI.
“It depends on how they define American facilities, and whether or not chip assemblies done in Singapore for American firms are subject to the 100 per cent (tariff),” he said.
He noted that firms like Micron Technology, a US company with offices in Singapore, and GlobalFoundries, which operates in both Singapore and the US, could be affected differently depending on how rules are applied.
Analysts also raised questions around how semiconductors shipped indirectly to the US would be treated.
For example, if a semiconductor manufactured in Singapore is exported first to a neighbouring country to be assembled into an electronic item which is then shipped to the US, it is still not clear if the value of the semiconductor will be tariffed, Mr Okun said.
Mr Song added: “Donald Trump might think it’s quite straightforward, but the supply chain can be quite complex.”
WAIT-AND-SEE APPROACH
Given the lack of clarity on who or what will face tariffs, semiconductor firms are adopting a wait-and-see approach.
“At this stage, there is limited detail on how this policy will be implemented, and we will need to wait for greater clarity before assessing its full implications,” said Mr Ang from SSIA.
CNA also contacted several semiconductor firms which operate in Singapore.
German chipmaker Infineon, which has a presence in Singapore, declined to comment on the tariff announcement, citing a lack of official documents.
OCBC's Ms Ling said further developments remain possible as other jurisdictions may respond with their own tariff measures.
“As what we have seen with the reciprocal tariff, the eventual semiconductor tariff level may well change and the firm exemption list may also evolve,” she said.
Related:
She added that Singapore's strong trade ties with the US could offer room for negotiations that may lead to more favourable outcomes.
“This is especially if Singapore can negotiate for some concessions, leveraging on its free trade agreements and strong economic cooperation with the US,” said Ms Ling.
Such negotiations could even position Singapore more favourably within the region.
“If some semiconductor firms pivot away from North Asia to Singapore, for example, this may provide some buffer,” she said.
SSIA said it remains in close dialogue with its member companies, government agencies and international partners.
“We will continue to facilitate information sharing, gather industry feedback, and support companies in evaluating risks and contingency planning,” Mr Ang said.
“The semiconductor industry has always adapted through complex shifts, and we remain confident that our ecosystem will rise to meet the challenges ahead.”
CNA has contacted the Ministry of Trade and Industry for comment.
Continue reading...