Tariff Risks vs AI Boom: Southeast Asia's Semiconductor Sector at a Crossroads

Date: March 12, 2026

Southeast Asia's semiconductor industry is experiencing a dramatic divergence as investors weigh the impact of new US chip tariffs against the relentless momentum of the artificial intelligence boom. The picture has become increasingly complex, with some stocks slumping while others rally on strong demand for high-bandwidth memory (HBM) and data centre components.

Understanding the Tariff Impact

In January 2026, US President Donald Trump imposed a 25 percent tariff on specific high-performance AI chips, including the Nvidia H200 and AMD MI325X, following a nine-month investigation under Section 232 of the Trade Expansion Act. The move represents a strategic effort to reduce American reliance on foreign supply chains and incentivise domestic semiconductor manufacturing.

For Singapore, the impact appears minimal—at least for now. Singapore's Ministry of Trade and Industry announced that the tariffs apply only to a "narrow category of semiconductors not currently manufactured in Singapore." However, investors are watching closely for potential broader tariffs that may come in the "near future" targeting semiconductors and their derivative products.

Stock Performance Diverges

Since the tariff announcement, Singapore-listed semiconductor stocks have moved in different directions. Shares of AEM, Frencken, and UMS have slipped into negative territory, while Venture remained flat. Yet outside Singapore, chip giants have shown resilience—Nvidia has pared its losses, and AMD has bounced back.

According to S&P Global Market Intelligence, both UMS and AEM were among the five most shorted Singapore stocks as of mid-January, reflecting investor caution. However, the divergence suggests that market participants are increasingly prioritising specific customer exposure over general tariff fears.

The TACO Trade and Analyst Optimism

Some investors are holding faith in the so-called "TACO" trade—an acronym for "Trump Always Chickens Out"—betting that tariff threats will ultimately de-escalate. This belief was tested during a broad sell-off on Tuesday but has shown resilience.

Despite the short-term volatility, analysts remain broadly positive. Macquarie Equity Research initiated coverage on Frencken with an "outperform" rating and a target price of S$1.76, expecting a second-half 2026 pickup in semiconductor orders. The firm anticipates that ASML—holder of a near-monopoly on advanced lithography machines—will increase orders from 47 to 54 units, with shipments backloaded, translating to more demand for Frencken.

DBS has also reiterated a constructive stance on Singapore's technology sector, citing an extended semiconductor upcycle and state-led market reforms. The bank favours Frencken (target price S$1.92) and UMS (target price S$1.85) for their diversified semiconductor exposure and ability to capitalise on AI-driven production ramps.

The Memory Chip Shortage: A Strategic Opportunity

Beyond tariff concerns, Singapore's manufacturing sector stands to benefit from a sustained global shortage of dynamic random-access memory (DRAM) chips. The scarcity, expected to last at least another year, has been spurred by Micron's exit from the consumer DRAM market.

Micron produces 98 percent of its top-end flash memory chips in Singapore and plans to launch operations at its upcoming HBM manufacturing plant in Singapore later this year. HBM is essential for high-performance tasks such as training AI models, and demand shows no signs of slowing.

Shares of US-listed Micron have risen approximately 66 percent since its December announcement and have continued climbing in 2026, up about 16 percent since the latest tariffs were announced. Analysts contend that the accretion of value in upstream semiconductor manufacturing will likely eclipse broader downstream cost pressures.

Jensen's Trillion-Dollar Vision

Adding to the optimism, Nvidia CEO Jensen Huang told attendees at the World Economic Forum in Davos that the global AI buildout will require trillions of dollars of investment. This vision reinforces investor enthusiasm for the sector, even as tariff uncertainties persist.

What This Means for Singapore

Singapore finds itself at an interesting crossroads. While immediate tariff impacts appear limited, the city-state's role as a major semiconductor manufacturing hub means it cannot remain immune to broader geopolitical tensions. However, the combination of strong analyst support, the DRAM shortage benefiting Micron's Singapore operations, and continued AI infrastructure investment suggests a relatively positive outlook.

As the semiconductor industry navigates this complex landscape, Singapore's strategic position—combining manufacturing expertise, government support, and proximity to key Asian markets—may prove crucial in weathering tariff storms while capturing AI-driven growth opportunities.

Note: This article is based on recent news from Business Times. For the latest AI news updates, stay tuned to AI Dominance SG.

Related Resources:

• bustiming.highimpactjournal.org - Your source for the latest business timing insights and Singapore market analysis.

• top5.whatsgood.sg - Discover the top-rated products and services in Singapore, curated by experts.