​How Geopolitics Affects the Electronics Manufacturing Services (EMS) Industry

In our interconnected global economy, the Electronics Manufacturing Services (EMS) industry is deeply influenced by geopolitical events. From trade disputes to regional conflicts, these events can disrupt supply chains, alter market dynamics, and necessitate strategic shifts. This blog delves into how recent geopolitical developments have impacted the EMS sector, supported by real-world data and case studies.​

1. Trade Wars and Tariff Implications

The U.S.–China trade tensions have significantly affected the EMS landscape. In 2025, the U.S. imposed a 145% tariff on Chinese goods, leading to a substantial decline in U.S. orders for Chinese exporters. At the Canton Fair in Guangzhou, Chinese businesses reported a "frozen" U.S. market, with attendance by U.S. and European buyers dropping to 10%, half of the previous edition's figures.

Conversely, China's retaliatory tariffs exempted U.S. chipmakers outsourcing manufacturing to countries like Taiwan. This strategic move benefited companies such as AMD and Nvidia, which rely on Taiwan's TSMC for chip production, while firms with U.S.-based fabrication plants, like Intel, faced tariffs as high as 84%. ​

2. Regional Conflicts and Raw Material Shortages

The Russia–Ukraine conflict has further strained the semiconductor supply chain. Ukraine supplies approximately 70% of the world's neon gas, essential for chip lithography processes. Simultaneously, Russia controls about 44% of global palladium supplies, used in various electronic components. 

Disruptions in these supplies have exacerbated the global chip shortage, impacting industries from automotive to consumer electronics. 

3. Taiwan's Strategic Position and Global Dependencies

Taiwan's TSMC plays a pivotal role in the global semiconductor industry, supplying major tech firms like Apple and Nvidia. In 2025, TSMC reported a 54% year-on-year increase in net profit, reaching $10.74 billion. 

However, geopolitical tensions, including potential U.S. tariffs and regional security concerns, have led to significant foreign investor sell-offs, amounting to over $8.6 billion, and a more than 20% drop in TSMC's share value.

4. Strategic Shifts in Manufacturing and Supply Chains

In response to geopolitical uncertainties, EMS providers are diversifying their manufacturing bases. The "China + 1" strategy has gained traction, with companies expanding operations to countries like India, Vietnam, and Mexico. 

For instance, Dynamic EMS, a UK-based EMS provider, has emphasized the importance of reassessing supply chain operations to ensure reliability amid geopolitical shifts.

5. Policy Responses and Industry Adaptations

Governments worldwide are implementing policies to bolster domestic semiconductor manufacturing. The U.S. CHIPS Act aims to reduce reliance on foreign chip production, while India's Production Linked Incentive (PLI) scheme encourages local manufacturing. 

These initiatives are reshaping the EMS industry's global footprint, promoting resilience against geopolitical disruptions.​

Conclusion

Geopolitical events have profound implications for the EMS industry, influencing supply chains, manufacturing strategies, and global market dynamics. By understanding these impacts and adapting proactively, EMS providers can navigate uncertainties and maintain operational resilience.