US Electronics Manufacturing Under Tariff Pressures: Shifting Dynamics and New Opportunities

The United States electronic component and circuit board manufacturing sector—encompassing a diverse array of products such as printed circuit assemblies, electronic connectors, and bare printed circuit boards—has faced mounting challenges in recent years. Foreign competition, persistently high labor costs, and shifting policy priorities continue to influence this vital industry. While federal measures like the CHIPS Act have injected optimism into domestic production, tariffs on Chinese imports have reshaped supply chains in ways that simultaneously offer both competitive relief and unexpected ripple effects.

Industry Snapshot

According to recent estimates, the largest product segment in the US market remains printed circuit assembly, accounting for $26.9 billion, or 44.1% of total industry revenue. Other significant categories include electronic connectors ($7.4 billion; 12.1%), bare printed circuit boards ($5.4 billion; 8.8%), and various other components ($16.1 billion; 26.3%). Sub-sectors such as capacitors, resistors, coils, transformers, and inductors collectively contribute $5.3 billion (8.7%) to the industry’s bottom line.

Despite the presence of major players like TE Connectivity Ltd. ($3.4 billion; 5.6% market share), Flex Ltd. ($1.8 billion; 3.0%), Gigabyte Technology Co. Ltd. ($67.3 million; 0.1%), and Celestica Inc. ($18.3 million; 0.0%), the industry as a whole is relatively unconcentrated. Over 91% of the market is served by a broad assortment of other companies, reflecting both the size and fragmentation of US electronics manufacturing.

Tariffs and Foreign Competition

The introduction of tariffs on Chinese electronic imports in recent years initially provided short-term relief for some domestic manufacturers, especially those historically undercut by cheaper overseas products. However, these tariffs also accelerated a shift in the global supply chain: some importers diversified away from China to countries like South Korea, Taiwan, or Vietnam to avoid increased costs. While China’s share of total US imports for circuit boards and electronic components has dropped, total foreign penetration has not receded as much as some hoped.

Moreover, persistent cost challenges continue to plague US-based producers. Wages account for approximately 20% of industry revenue, a figure significantly higher than in many Asian manufacturing hubs. This differential is one reason foreign competitors capture portions of the US market—even with tariffs in place. Some domestic manufacturers, particularly those working in specialized fields such as aerospace or defense, have found ways to compete on quality and innovation instead of price alone.

Labor Costs and Job Creation

Balancing economic nationalism against the reality of global competition is central to the labor conversation in the US electronics sector. Although reshoring and higher tariffs can, in theory, boost domestic employment, companies still grapple with rising wages and the need for specialized talent. The industry’s low revenue per employee underscores a structural challenge: greater automation and AI-driven production require highly trained engineers and technicians, yet employing them remains costly.

To offset labor expenses, many US manufacturers deploy increasingly sophisticated automation. From surface-mount technology (SMT) for small-format electronics to AI-driven inspection tools, these investments streamline production and reduce rework costs. In the long run, strategic automation can preserve or even grow domestic jobs—especially higher-paying roles in engineering and software—by keeping the competitive edge within the United States.

Policy Measures and Government Support

Federal policy support through measures such as the CHIPS Act (which earmarks $52 billion to boost domestic semiconductor capacity) has encouraged optimism. Additional proposals, like the Supporting American Printed Circuit Boards (SAPCB) Act, aim to channel billions more directly into circuit board and electronic manufacturing. These initiatives can help mitigate some of the ongoing cost disadvantages and supply chain vulnerabilities by incentivizing domestic production.

Nevertheless, with large-scale semiconductor and electronics facilities taking multiple years to construct and fully operationalize, the near-term outlook remains mixed. While growth has improved in certain market segments—particularly automotive, where electric vehicle (EV) components have fueled significant demand—many of these projects have not yet matured enough to alter industry fundamentals.

EV Demand, Transportation, and Future Outlook

One bright spot in recent years has been rising demand from the transportation segment, which now represents about 60% of industry sales. As the push for electric vehicles and advanced driver assistance systems grows, companies such as TE Connectivity and Flex Ltd. have capitalized on supplying high-density interconnect boards, power electronics, and specialized connectors.

Going forward, evolving political priorities may recalibrate the US EV market. For instance, the reduction of EV mandates or subsidies could dampen domestic EV adoption, compelling some electronics manufacturers to pivot sales to international markets where EV incentives remain robust. At the same time, potential tariff expansions—such as the newly proposed duties on Canadian and Mexican imports—may further reshape sourcing strategies across the automotive supply chain.

Conclusion

While the US electronics manufacturing industry has benefited from recent protective tariffs against Chinese goods, the global race for low-cost, high-efficiency production continues to constrain domestic gains. Higher labor expenses persist as a central hurdle. To stay competitive, many American manufacturers are investing in automation, AI-driven inspection, and niche specializations like defense or aerospace—areas less vulnerable to commoditization.

In the short term, government incentives and tariff barriers may continue to buoy some domestic operations, but long-term growth will hinge on how effectively companies capitalize on new technologies, navigate shifting trade policies, and train a modern workforce. Ultimately, the ability of US electronics makers to move up the value chain, innovate in high-density circuit board production, and produce at scale will decide whether they can thrive amid intensifying global competition.

April 17, 2025 by a collective of authors of MMCG Invest, LLC, USDA and manufacturing facilities feasibility study consultant