There are no signs that the global tariff battle is easing. The focus is now squarely on semiconductor components and related equipment. The stakes have risen dramatically, and the complexity of this new round of trade barriers is hard to overlook.

According to Bernstein analysts, US suppliers of wafer fabrication equipment (WFE) are unlikely to receive exemptions from China’s newly announced retaliatory tariffs. The size of the tariffs is substantial at 125%. Bernstein expects this escalation to result in US firms losing market share and facing intensifying margin pressure, particularly for major players such as Applied Materials and Lam Research. Many investors had hoped that US WFE imports would be exempted, given the sector's strategic role in China's efforts to bolster domestic manufacturing. Those hopes have now been dashed.

"The official statement clearly indicates that no existing exemptions will apply to this additional tariff," Bernstein noted, adding that the move could create short-term headaches for Chinese manufacturers, especially those in segments such as process control where "local alternatives are still lacking."

In the long term, however, local Chinese equipment makers such as NAURA, AMEC, and Piotech stand to benefit. "US vendors might face potential share loss or margin dilution," Bernstein said.

One crucial issue is how Chinese customs authorities will determine the country of origin for WFE. "Judging by the current documents, very counterintuitively, the origin of semicap may be determined instead by where the majority of components are manufactured," Bernstein warned. The company estimated that up to 11% of US supplier revenue could be at risk in such a scenario.

In this environment, local suppliers are poised to capture a significant share of the business, with Chinese rivals potentially seeing 24% growth, Bernstein concluded.

The firm sees little chance that US WFE will be exempted from China's retaliatory tariffs. However, it does not rule out a future reassessment of the policy as the trade landscape evolves.