I hope everyone had a nice weekend with family and friends. I watched The Open on television to see one class act, Scottie Scheffler, just take golf to a higher standard. I only won one tournament in my career, but he was right. Golf is a challenge. To me, it was a battle against nature. Nature usually won, but there were a few instances when I turned the tables. Those are my memories.
I had most of the rest of the weekend to read and, more importantly, think. Many of you are following me based upon my investment and interest in the rare earths. I hope you are enjoying it all and learning, as everyone is. Like anything else, it takes time. I’ve been digging through information, obtaining what I’ll call a “ranking” of those in the industry that rule upcoming changes. They are important, but there are just a few steps in between. These rule all of the entities being ranked. It’s information that will apply to all, especially in today’s Trump tariff venue.
Section 232 On U.S. Chip Stocks
The Trump administration’s Section 232 investigation into semiconductors is shaping up to be a major policy lever. The potential consequences across the chip industry are huge and will lead to decisions made in the rare earth markets..
Initiated last April, the probe aims to assess whether “imports” of the semiconductors and related equipment threaten national security. That’s a big one in a Trump world, a determination that could justify broad tariffs. I’m looking for a final report to be out sooner rather than not.
Section 232, part of the “Trade Expansion Act of 1962,” gives the President sweeping powers to impose remedies, including large tariffs, especially if imports are deemed to harm national security. Compared to other basic tariff tools, it offers “much broader authority to impose remedies.” This came directly from Bernstein, analysts I follow across several industries for good reason. Importantly, the probe’s scope includes not just standalone chips but also the products that contain them. That’s really important. The U.S. imported about $45 billion in semiconductors in 2024. Much of these values come embedded in finished goods, like machinery, electrical equipment, and vehicles.
Tariffs could be applied either at the chip level or based on “semiconductor” content inside devices. The latter one possibly including incentives for using only U.S.-made components. It’s the most effective way to tariff the value of imported semiconductors and is likely to go after component-level content. It cannot be easy to administer this complexity of what has evolved into natural global supply chains. Among potential beneficiaries, Texas Instruments (“TXN”) has been and remains my pick. From my days of researching the rare earth markets, it appears to me that TXN has large global capacities with a huge and growing U.S. footprint.
Texas Instruments has been building greenfield capacity in the U.S. TXN has clearly been prepping for a scenario like this for some time and is one of the few companies that is actually building substantial amounts of greenfield capacity in the U.S.
According to Bernstein, the potential for tens of billions of tariff dollars to be raised could lift device costs significantly. While tariffs are usually broadly seen as negative for demand, the policy may offer a relative advantage to U.S.-centric manufacturers if implemented. If you build it, they will come. If you turn your waste, rare earths, into a cash flow reusable segment, they will expand on all sides. All we need to do over time is to determine which companies can do everything in this segment well. That’s where our heads are because this is a multiple pathway. There are many turns to follow. This is just one bend in the highway that needs to be watched.
It’s not just a song, it’s a reality. Deep in the heart of Texas is real. There are over 170 semiconductor companies that have made Texas their home. More are coming. About five years ago, after a wonderful multiyear vacation on Vancouver Island, I had a few choices to make. One of them was where in the United States I was going to land. It was not a difficult choice. Now, after deciding which, of many opportunities, I was going to take, my last decision is easy. Now, which cowboy hat am I going to wear?