McKinsey weighs in on tariffs and chip supply chains
New research from analyst group McKinsey & Co explores US tariffs policy and its likely impact on the semiconductors sector.
In a highly changeable environment – underlined by the US Court of International Trade ruling, and subsequent appeals court ruling allowing tariffs to stay in place for now – the paper advises companies to undertake “proactive planning exercises,” which could be the difference between gaining a competitive advantage or being caught out.
When assessing the impact of tariffs, companies need to consider two primary factors, said McKinsey: the value-add stage at which the tariff is assessed (for example, chip-level and end-device tariffs) and how the product’s exporting country of origin is defined (such as the final value-add step or country of last substantial transformation).
Since Asian markets like China, Malaysia, and Taiwan are where most of the world’s semiconductor chips are manufactured and assembled into components for consumer products, compute equipment, and automobiles, an end-device tariff would tax products after the value-add has been incorporated throughout the product life cycle.
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