Arizona’s semiconductor industry is facing a new variable in its growth equation: tariffs. With billions of dollars on the line, the industry is bracing for what comes next. If higher import taxes on materials from Mexico, China and Canada take effect, chip manufacturers must adapt — and fast.
Even as TSMC ramps up production of four-nanometer chips in Phoenix, the semiconductor supply chain remains deeply global. Key materials, advanced packaging and specialized components often cross multiple borders before a chip reaches its final destination. Now, uncertainty looms: Will tariffs drive up costs? Could they slow Arizona’s momentum as a semiconductor leader? And how are companies preparing?
Arizona’s economic future is closely tied to international trade — especially with Mexico and Canada, two of the state’s top trading partners. In 2023 alone, Arizona imported $11.8 billion in goods from Mexico, $3.9 billion from China and $2.59 billion from Canada, according to U.S. trade data. Semiconductors and electronics top the list of both imports and exports.
The problem? Tariffs on critical chip components could drive up production costs — and those increases might not stop at manufacturers. Higher costs could trickle down to Arizona businesses, impacting pricing, hiring and supply chains across the state.
“The trade relationship with Mexico is, arguably, the most important one that we have,” Chris Camacho, president and CEO of the Greater Phoenix Economic Council, told the Arizona Republic.
Look at any semiconductor supply chain, and one fact is clear: It’s built on partnerships. Arizona-based manufacturers may design and fabricate chips locally, but final packaging and assembly often happen elsewhere.
Over the past few years, nearshoring (relocating production closer to the U.S.) has exploded. In 2023, Mexico overtook China as Arizona’s largest trading partner. The country’s role in semiconductor packaging, transportation and materials sourcing is only growing.
Now, tariffs could complicate that shift. While some business leaders argue that tariffs will encourage domestic manufacturing, others worry that higher costs could weaken Arizona’s competitive edge in the semiconductor race.
Companies across Arizona aren’t waiting to see what happens. They’re adjusting their strategies now to mitigate risk and ensure continued growth.
TSMC, Intel and Amkor Technology are ramping up U.S. production. TSMC is on track to begin high-volume chip production in Arizona by early this year. If tariffs increase costs on overseas operations, TSMC could fast-track plans to expand its Arizona capacity.
Diversifying Supplier Networks
Some firms are already shifting their supplier networks. Instead of relying heavily on Asian or Mexican imports, companies are exploring partnerships with European manufacturers and increasing domestic sourcing.
Manufacturers are already looking at ways to diversify their supplier networks in anticipation of potential trade policy shifts, according to Danny Seiden, president and CEO of the Arizona Chamber of Commerce and Industry. He noted that many companies are taking proactive steps to maintain stability and ensure they can continue operations smoothly, regardless of how tariffs unfold.
Strengthening Arizona’s Local Supply Chain
As Arizona continues cementing its status as a semiconductor hub, companies are investing in in-state resources. Local suppliers of chip components, packaging and materials could see new opportunities if tariffs make international imports costlier.
The Arizona Commerce Authority has been actively working to attract semiconductor suppliers, ensuring that Arizona remains a competitive environment for chip manufacturing — regardless of trade disputes.
The United States semiconductor industry has already faced major challenges: The global chip shortage strained supply chains, forcing manufacturers to adapt to volatile demand. Geopolitical tensions have reshaped trade agreements, altering how critical materials move across borders. And now, tariffs introduce another layer of uncertainty, one that could redefine the economics of chip production domestically.
What happens next isn’t just about policy — it’s about Arizona’s long-term economic future.
Every decision made in Washington has the potential to ripple through Arizona’s supply chains, affecting timelines, pricing and competitiveness on the global stage. Industry leaders are not just watching; they’re actively preparing — adjusting supply strategies, exploring new partnerships, and reinforcing domestic capabilities to ensure resilience no matter how the landscape shifts.
One thing is clear: Arizona’s semiconductor sector isn’t standing still. It’s anticipating change, adapting, and positioning itself to remain at the forefront of chip manufacturing — no matter what challenges come next.
Did You Know: In 2023 alone, Arizona imported $11.8 billion in goods from Mexico, $3.9 billion from China and $2.59 billion from Canada, according to U.S. trade data. Semiconductors and electronics top the list of both imports and exports.
