Tim Archer, president and chief executive officer of Lam Research, speaks during a Senate Commerce, … [+]
With the impending Trump administration set to take office, we can anticipate a flurry of policy changes that could reshape the economic landscape. President-elect Trump has already signaled aggressive stances on trade, including a proposed 25% tariff on imports from Mexico and Canada to address issues like drug trafficking and illegal immigration. While these tariffs could stoke inflation and pressure U.S. manufacturers, they may also serve as negotiation tools to secure more favorable trade terms.
Beyond tariffs, the administration’s strategy may extend to tighter restrictions on critical electronics components, including semiconductor capital equipment. Similar to the existing export bans targeting China, this approach could be aimed at protecting U.S. technological leadership and securing supply chains for strategic industries. Such restrictions could limit access to advanced manufacturing tools for certain countries, reshaping global production networks while accelerating domestic investments in semiconductor capabilities.
Resilient Semicap Equipment Companies
For semiconductor equipment manufacturers like Lam Research (LRCX), Kulicke & Soffa (KLIC), and Cohu (COHU), these policies present both challenges and opportunities. Export bans on advanced technologies could temporarily restrict growth in key overseas markets like China, where many of these companies have historically derived substantial revenue. However, the broader push to localize semiconductor production and reduce reliance on foreign supply chains aligns with long-term industry trends. Governments and private enterprises are expected to invest heavily in domestic semiconductor manufacturing, creating new demand for advanced tools and equipment.
Lam Research, for instance, has already demonstrated its ability to navigate restrictive trade policies. Following the U.S. government’s announcement of additional export controls targeting China, Lam assured investors that the impact aligns with prior expectations, leaving its financial guidance unchanged. The company remains optimistic about a 2025 rebound in wafer fab equipment (WFE) demand, driven by investments in NAND technology, advanced foundry logic, and DRAM tied to high-bandwidth memory.
Similar resilience can be found in Kulicke & Soffa and Cohu, which provide critical assembly, testing and handling equipment. These companies are poised to benefit from the global expansion of semiconductor manufacturing, particularly as governments prioritize domestic chipmaking capacity to mitigate supply chain vulnerabilities.
The Future Still Looks Bright
While the Trump administration’s trade and export strategies could introduce short-term volatility, they may ultimately catalyze a wave of domestic manufacturing investment. The semiconductor industry is already responding to geopolitical uncertainties with significant capital commitments to build fabs and supply chains closer to home, which could drive demand for the sophisticated equipment provided by companies like Lam Research, Kulicke & Soffa and Cohu.
In an environment of rapid technological advancement and evolving trade policies, semiconductor capital equipment companies are positioned to thrive. The Trump administration’s potential restrictions on critical technologies, while challenging in some respects, underscore the strategic importance of these firms. By enabling the production of next-generation semiconductors and supporting the growth of domestic manufacturing, Lam Research, Kulicke & Soffa and Cohu offer investors a unique opportunity to participate in the future of the semiconductor industry. These companies exemplify the “picks and shovels” approach, delivering essential tools to power the AI and high-performance computing revolution.
This report is an excerpt from The Prudent Speculator investment newsletter, of which I am Editor. For more in-depth analysis and exclusive insights like those shared in this article consider joining The Prudent Speculator here.
