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Deep into the dog days of summer, supply chains dealt with stronger demand, tighter conditions and another round of trade and geopolitical uncertainty last month. Longer supplier delivery times, inventory building and rising costs kept procurement teams on their toes, while new U.S. tariffs and uncertainty in the Strait of Hormuz forced chief supply chain officers to revisit costs, forecasts and contingency plans.
On a positive note, LG Electronics added production capacity in Vietnam, while Samsung Electronics expanded its semiconductor relationship with Broadcom. Together, the developments summed up July: stronger activity, ongoing supply concerns, higher trade costs and continued investment in capacity.
The Chip Shortage Persists
New data centers and hyperscalers continue to eat up chip capacity, effectively leaving everyone else to battle over a smaller pool of available supply. According to Technology.org, major electronics manufacturers are voicing their concerns about the shortage. For example, Samsung Electronics says the problem could worsen and last until at least 2028.
Dynamic random-access memory (DRAM) is in particularly short supply right now. Used in PCs, laptops, AI systems, servers, cars and other electronic devices, this short-term memory includes high-bandwidth memory (HBM), a specialized form of DRAM used in AI chips and other high-performance systems.
“The shortage is now old enough to have changed the shape of the industry rather than just its prices,” the publication adds. It says Samsung, SK Hynix and Micron together control more than 95% of DRAM output, and each has been shifting wafers toward HBM, which eats more silicon per usable bit than commodity memory.
“Analysts have described AI memory as effectively sold out,” it continues, “and new fabs cost $15 billion to $20 billion and take years to build, so supply cannot respond quickly even when the money is available.”
New Tariffs Were Introduced
Supply chains were hit by another trade development in July when the U.S. Trade Representative (USTR) imposed new Section 301 tariffs on imports from 60 economies, citing their failure to prohibit or enforce bans on goods made with forced labor. The decision followed two rounds of hearings, more than 2,100 public comments and talks with over 45 governments.
Rates vary by country and product. Imports from 18 economies, including Canada, India, Mexico and the United Kingdom, face a 10% duty. Certain products from the European Union, Taiwan, Japan, South Korea and Switzerland face duties of 10% or 12.5%, minus the existing most-favored-nation rate. Most other covered economies face a 12.5% duty.
USTR exempted some raw materials and other products that could be difficult or costly to source elsewhere. Other exemptions apply to countries that have made commitments on forced-labor import bans. U.S. Trade Representative Jamieson Greer said the tariffs address both human rights abuses and trade practices that burden U.S. commerce.
Things Remained Tense in the Strait of Hormuz
Shipping through the Strait of Hormuz remained severely constrained in July, with traffic running at a fraction of normal levels, according to IndustryWeek. Hopes for a ceasefire also faded as U.S. and Iranian strikes continued and both sides hardened their positions over the waterway.
IndustryWeek reported that U.S. Central Command’s July 21 strikes targeted Iranian maritime capabilities, military operations centers, aircraft hangars and drone storage facilities. The goal, according to the command, was to weaken Iran’s ability to threaten commercial shipping through the strait.
U.S. petroleum reserves also continued to fall. The Strategic Petroleum Reserve held 311.4 million barrels for the week ending July 17, down from 316.5 million barrels one week earlier, according to the U.S. Energy Information Administration.
Two Electronics Giants Add Capacity
The month wasn’t all shortages, tariffs and shipping disruptions. LG Electronics expanded its advanced materials operation with a new glass powder production line in Haiphong, Vietnam. The 3,200-square-meter line adds 2,000 tons of annual capacity and gives LG a second production base for materials used in appliances, building products, food packaging and medical equipment. About 80% of the process is automated.
Also in July, Samsung Electronics expanded its semiconductor relationship with Broadcom through a five-year agreement expected to exceed $200 billion through 2030. According to CNBC, the companies will collaborate on memory chips, contract chip manufacturing, advanced packaging and next-generation high-bandwidth memory products. Broadcom’s next-generation communications chips will also be produced using Samsung’s sub-2-nanometer process technology.
