A recent report by global consultancy Kearney, in collaboration with industry association SEMI, has raised alarms over the increasingly precarious state of the semiconductor supply chain. According to the findings released in their report titled “State of Semiconductors 2025: Braving the Storm,” a dramatic surge in demand driven by artificial intelligence (AI) applications is exacerbating existing vulnerabilities within the semiconductor ecosystem, characterised by trade tensions and low buyer confidence.
The report indicates that AI server demand is experiencing compounded annual growth rates (CAGR) of 40-50%, which is placing unprecedented stress on chip supply, especially as AI’s voracious appetite for both advanced and mature nodes continues to grow. Kearney partner Bharat Kapoor emphasises that semiconductors are not just commodities; their manufacturing is intricate, demanding precise coordination, substantial R&D investments, and highly specialised labour. This complexity contributes to growing apprehensions within the industry, as reflected by a notable decline in confidence among semiconductor leaders—down to 65% from 82% the previous year. Notably, 42% of these leaders are bracing for shortages in advanced nodes.
Trade tariffs appear to be a significant factor in this ongoing turmoil. Kearney’s analysis suggests that these tariffs are entrenching a structural divide between Eastern and Western semiconductor ecosystems. China and South Korea are reportedly investing heavily in fabrication facilities (fabs), while the United States is focusing on reshoring production capabilities. The report highlights that geopolitical tensions are not merely abstract worries; they manifest in tangible constraints on supply chains.
Supporting this perspective, recent insights from the Bank of Korea predict declines in South Korea’s semiconductor exports due to anticipated U.S. tariffs, with projections indicating a 0.2% drop overall. This aligns with fears expressed in other articles that tariffs could hinder both U.S. domestic ambitions in semiconductor production and its aspirations for AI leadership. Critics within the industry assert that such measures may exacerbate existing challenges rather than resolve them, noting that critical projects are often delayed when tariffs disrupt international supply chains. The economic ramifications of these policies resonate beyond the immediate semiconductor market and are anticipated to impact sectors like automotive and consumer electronics as well.
Furthermore, while the U.S. government is pouring significant resources into chip manufacturing to mitigate reliance on foreign supply chains, reports indicate that former President Trump’s tariff policies may impede progress rather than facilitate it. As the semiconductor industry grows increasingly fragmented, leaders are urged to adopt innovative product design strategies as a means of enhancing supply chain resilience.
Kearney’s report underscores that in an environment marked by uncertainty and competition for limited resources, particularly among AI-driven sectors, the most proactive buyers will not only secure chips but also gain a strategic advantage. As industries increasingly intersect and compete for the same semiconductor supplies, the potential for conflicts and complications rises, further heightening the urgency for a re-evaluation of current strategies, investments, and international collaborations.
In summary, the findings from Kearney and SEMI paint a picture of a semiconductor industry at a crossroads, grappling with soaring demand, significant geopolitical challenges, and an evolving market landscape that compels stakeholders to rethink how they secure their positions within the global supply chain.
Reference Map:
- Kearney and SEMI report on semiconductor supply chain challenges.
- Bank of Korea forecasts on declining South Korean exports due to U.S. tariffs.
- Overview of U.S. semiconductor growth and impacts of tariffs on domestic manufacturing.
- Analysis of the U.S.-China tech war and its implications for Asian allies’ supply chains.
- Historical context on tariffs imposed by the Trump administration and industry responses.
- Industry expert concerns regarding escalating tariffs and their impact on AI and tech.
- Broader insights into semiconductor supply chain disruptions consequent to tariffs.
Source: Noah Wire Services
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