A Bull In A China Shop

In light of the developing trade war between the US and China, let’s review the all-important Semiconductor sector and in particular, the Semi Equipment segment, which is a key economic early bird (and canary in a coal mine).

Various sectors took hits on Friday as Trump moved forward with Tariffs on China. But most of those sectors and industries are follow-on aspects of the economic cycle, which got its start when the early bird chirped in early 2013.

With China in Trump’s crosshairs and China a very key player in Semi Fab Equipment, there is a fundamental reason that the Equipment companies are faltering. From SEMI by way of a post at nftrh.com in March.

“SEMI predicts Samsung will lead the pack in fab equipment spending in both 2018 and 2019, even though it will invest less each year than in 2017. By contrast, China will dramatically increase its year-over-year (YOY) fab equipment spending for the next two years – by 57 percent in 2018 and 60 percent in 2019 – to support fab projects from both overseas and domestic companies. The China spending surge will thrust it past Korea as the top spending region in 2019.”

The rate of Semi Fab spending growth was easing and a heavy reliance was being put on China to pick up the slack. Here is a screenshot from that post…

With the delicate balance of the Semi industry’s global supply chain you might conjure an image of Trump’s head, stitched to the body of a bull and set loose in a China shop. Okay, I’ll play to the cheap seats for a laugh (source: capitaladvisorsltd.com)…

trump bull

But SEMI’s concerns about this blunt force known as Trump are real, and serious.

“More than 100 lines of the proposed tariff list directly impact the semiconductor supply chain, hitting fundamental components of the semiconductor manufacturing process. SEMI has fought back, strongly urging the removal of these tariff lines from the proposed tariff list. At a bare minimum, the tariffs against China will cost the U.S. tens of millions annually in additional taxes, create lost revenue as a result of reduced exports, threaten thousands of high-paying U.S. jobs, stifle innovation and curb U.S. technological leadership – all while not directly addressing U.S. concerns with China.”

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