Access the Editor’s Digest at no cost
Roula Khalaf, the FT’s Editor, handpicks her favorite articles for this weekly newsletter.
Smiths Group, an engineering company, has joined the trend of manufacturers finding ways around the trade policies of US President Donald Trump. They are planning to produce some of their semiconductor testing devices in Texas instead of China.
CEO Roland Carter revealed to the Financial Times that the FTSE 100 conglomerate has been moving the manufacturing of their semiconductor “sockets” from Suzhou, China to Texas.
The decision to make this shift, which began before the US presidential election in November, was influenced by years of increasing trade restrictions initiated during Trump’s first term and continued under President Joe Biden.
Smiths Group emphasized that this move became even more crucial following recent announcements of additional tariffs.
Carter stated that the relocation is aimed at supporting US-based chip manufacturers who prefer the product to be made in America, aligning with the company’s strategy of producing goods close to where they are needed.
“Smiths is very much local for local,” he emphasized.
He added, “This will position us well to serve US customers without being subject to the tariffs imposed on products manufactured in China.”
Smiths’ decision is part of a wider trend in the chip industry to establish US-based supply chains in response to pressure from Washington to ensure a stable supply of semiconductors crucial for AI development.
Leading companies like Taiwan Semiconductor Manufacturing Company and Nvidia have recently announced significant investments in the US to appease Trump and avoid potential tariffs on chip imports.
The demand for testing devices, such as those produced by Smiths, is expected to rise as manufacturers increase production of advanced GPUs used in AI systems.
Carter mentioned that Smiths is developing test sockets for advanced GPUs.
The company disclosed that it has been investing millions in additional equipment and staff for its existing factory in Irving, Texas, with plans to complete the expansion by the next fiscal year starting in August, while the Chinese site will continue manufacturing chip sockets for Asia and Europe.
Since Trump’s return to office earlier this year, his administration has imposed tariffs on Chinese goods and threatened similar actions on semiconductors from Taiwan. Smiths aims to assure customers of a continuous service despite any potential trade restrictions.
In its recent report on March 25, Smiths noted a significant increase in operating profits at its Interconnect business, attributing it to the growing demand for GPUs for AI applications.
Despite this success, Smiths is looking to sell its Interconnect business to streamline operations and enhance its financial position.
Carter believes that divesting the semiconductor division will unlock value and enable Smiths to focus on core operations, creating a more financially robust business.