Morgan Advanced Materials, a veteran British semiconductor material supplier, recently issued a profit warning, admitting that its operating results in 2025 will be impacted by multiple factors. In addition to the direct impact of slowing growth in the electric vehicle market, the Trump administration's new tariff policy is becoming the biggest variable threatening the stability of global supply chains.
As a multinational company with production facilities in the United States, Mexico, Canada and China, Morgan Advanced is urgently evaluating strategic relocation options to avoid the impact of tariffs that could reach as high as 25 percent.
According to the latest financial disclosure, the company's revenue in 2024 fell 1.3% year-on-year to 1.1 billion pounds (about 1.38 billion US dollars), although through streamlining the organizational structure and consolidating the manufacturing base adjusted operating profit increased by 6.7%, but management expects revenue will continue to show a single-digit decline in 2025. This performance is in sharp contrast to the cyclical adjustment of the semiconductor industry, the current global semiconductor market is in an upward cycle driven by the explosion of AI computing power demand, but geopolitical risks are distorting normal market rules.
Triple pressure squeezes living space
1. Tariffs hang in the balance
The Trump administration's proposed semiconductor tariff policy is remarkably targeted. According to people familiar with the matter, in addition to the planned 25 per cent base tariff on chips produced overseas, the tax rate on Chinese semiconductor products could climb to 60 per cent. This tiered tariff system also exposes multinational companies with production in Mexico, Southeast Asia and other places to the risk of soaring costs. Morgan Advanced's silicon carbide wafer processing facility in Mexico is at the center of the storm.
2. Impact of technological route change
As a core material supplier of silicon carbide (SiC) power semiconductors, the company is deeply affected by the transformation of the electric vehicle industry. The phenomenon of "gasoline vehicle reflux" in the US market has led to a slowdown in the growth rate of SiC device demand, and the Trump administration's policy expectation to cancel the tax credit for electric vehicles has made downstream customers postpone expansion plans. Industry data show that the growth rate of electric vehicle penetration in North America in 2024 is 3.2 percentage points lower than expected, which is directly transmitted to the contraction of upstream materials orders.
3. The cost of supply chain reconstruction surges
In response to the threat of tariffs, companies have had to launch "China +1" or even "North American nearshore" production strategies. However, the purity of semiconductor grade silicon carbide materials is required to reach 99.9995%, and the relocation of the production site means the need to rebuild the complete clean room system and process certification process, which is expected to cost more than £80 million per plant transfer. This forced strategic investment will eat sharply into corporate profit margins.
The difficulties of the UK semiconductor industry are a microcosm of the turmoil in global supply chains. According to a simulation by the British Department of Commerce, if Trump's tariff policy is implemented, the country's high-tech exports will face an additional cost of 4.7%, while the cross-border flow efficiency of semiconductor intermediates may fall by 30%. This shock wave is being transmitted down the chain:
1, equipment manufacturers: ASML and other enterprises have delayed the delivery of extreme ultraviolet lithography machines to Asian customers;
2, wafer foundries: TSMC's new plant in the United States delayed production, resulting in limited advanced process capacity;
3, terminal brand: Apple, Nvidia and other companies brewing product price increases to pass on costs.
This systemic risk is forcing countries to accelerate the construction of regional supply chains.
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