For decades, most U.S. businesses have defaulted to transacting international business in U.S. dollars. The dollar’s status as the world’s reserve currency makes this possible, with approximately 55% of bank customers’ cross-border flows denominated in dollars, according to a recent report from the International Monetary Fund. However, “possible” doesn’t always mean “optimal.”
That’s certainly true in the semiconductor industry, where supply chains crisscross the globe and many U.S.-based firms have foreign employees, subsidiaries and partners. Furthermore, the U.S. semiconductor industry derives approximately 70% of its revenue from overseas sales, according to the recently issued 2025 State of the Industry Report from the Semiconductor Industry Association. In this highly complex ecosystem, it’s logical that some transactions would be best handled in dollars and others in foreign currencies.
In our experience, many executives at U.S.-based firms recognize advantages of conducting certain trade in foreign currencies. However, there is often reluctance to actually do so, as some executives may perceive the use of dollars as risk-minimizing.
In actuality, insisting on dollars can, itself, introduce business risk — not to mention cost. Based on our conversations with business leaders in semiconductors and other industries, more people are recognizing those risks and costs. These conversations generally start with one of three angles: (1) receiving invoices, (2) issuing invoices and (3) establishing foreign currency accounts.
Receiving Invoices
While foreign suppliers may be willing to invoice U.S. companies in dollars, there may be hidden costs associated with this convenience. For example, a foreign supplier may simply take the prevailing exchange rate on the date of the invoice and use it to calculate a large margin to insulate against daily currency fluctuations. This margin amounts to a convenience premium paid by the U.S. firm. Alternately, a foreign supplier may have a sophisticated exchange (FX) program yet still offer an unattractive rate.
To avoid both situations, it is recommended that U.S. firms request invoices in both U.S. dollars and the supplier’s local currency. Then, in collaboration with a financial institution that offers FX advisory services, the firm can reduce hidden supply-chain costs.
Often, the most cost-effective approach is to pay in the supplier’s local currency while simultaneously entering a paired forward contract to fix the exchange rate for the lifecycle of the accounts-payable transaction.
FX forwards are especially helpful when companies have large, known FX payables such as for equipment, real estate or construction expenses. In establishing the forward, the financial institution will generate an “all-in” exchange rate, and the company then accepts those terms. Specifically, the financial institution helps the U.S. firm hedge the FX risk by defining the U.S. dollar amount needed to settle the invoice (in foreign currency) on a particular future date.
Because this arrangement involves a credit facility, various agreements and disclosures must be executed in advance. Bankers experienced in foreign exchange can facilitate these as part of a strategic review to eliminate hidden supply-chain costs.
Issuing invoices
As U.S.-based firms expand internationally, they should also consider FX impacts. For example, a company involved in a competitive bidding scenario may want to offer a bid in both dollars and the potential client’s local currency. This modest concession offers the client convenience and can establish goodwill that may support the firm in winning the business.
As with receiving invoices, issuing invoices in foreign currencies should occur with advisory input from a financial institution capable of guiding the U.S. firm through the risks associated with this strategy.
Establishing Foreign Currency Accounts
As U.S. firms ramp up cross-border business, they may find it helpful to establish their own foreign currency accounts (FCAs), denominated in the currencies they use in the course of their business.
FCAs can be especially helpful when firms have foreign subsidiaries and/or pay employees who reside outside of the U.S. Depending on the size of these transactions, companies may find it helpful to conduct hedging transactions, as necessary.
Additional Suggestions
Following are a few suggestions based on our experiences working with commercial clients:
- Business leaders should ensure their financial institution is a member of the Société for Worldwide Financial Telecommunications (SWIFT). Many business leaders are generally aware of SWIFT as a cross-border banking system but may not realize the practical importance of sending various inbound and outbound international messages.
- Obtain a cross-border letter of credit from a financial institution capable of supporting this request. Ideally, the financial institution can provide a letter denominated in foreign currency in addition to one denominated in dollars.
- Ensure access to bankers with expertise in cross-border trade and foreign exchange — both structuring transactions and mitigating risk.
Attention to all these areas can help U.S.-based firms reduce hidden costs and establish productive business relationships with foreign counterparts — while attending to both business and financial risks.
Shawn Walters is senior vice president of global banking services at UMB Bank, Capital Markets Division.
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