New Tariffs, Old Problems and The Need for Supply Chain Resiliency

The U.S. government’s newly imposed tariffs and broader trade restrictions are accelerating systemic risks of electrical component shortages, with cascading effects across industries. But in many ways, this is just the latest wave in a recurring cycle of disruption. From the COVID-19 pandemic to past mineral scarcities, supply chain crises occur every few years, catching the industry off guard each time. It’s time we acknowledge the cyclical nature of these shortages and build resiliency into the system.

Here’s how these policies intersect with existing supply chain challenges to create critical vulnerabilities:

The 25% tariffs on imported engines, transmissions, and electrical components (effective May 3, 2025) compound existing shortages in three key ways:

• Supply Chain Regionalization Delays: Domestic manufacturers lack capacity to replace imported electrical systems and semiconductors quickly. For example, U.S. production of transformers and switchgear already faces lead times of 1–4 years.
• Material Bottlenecks: Trade barriers on Chinese/Mexican imports disrupt access to rare earth metals and semiconductor-grade materials. Russia/Ukraine conflicts have already strained neon gas supplies (critical for chip production), and tariffs exacerbate these shortages.
• Inventory Depletion: Manufacturers are exhausting safety stocks to avoid tariff costs, worsening the scarcity of components like microcontrollers and voltage regulators.

Market Disruption: Refurbished, Counterfeit and Fake Components

It remains to be seen how severe the impact on the electronics supply chain market will be due to the decoupling between China and the West, particularly the U.S. Yet, history has taught us that shortages or even the threat of a shortage lead industries to look for creative solutions. While sometimes being creative can be useful, in many cases it can bring forth reliability risks – especially in mission critical systems.

The semiconductor grey market, valued at $75 billion annually, is expanding as manufacturers scramble for alternatives. Counterfeiters exploit gaps with sophisticated forgeries, including:

• Re-marked Chips: Lower-grade components labeled as high-spec parts.
• Recycled ICs: Stripped from e-waste and resold.
• Fake Chips: Non-franchised components produced by unauthorized fabs.
• Scrap Materials: Chips that were meant to be scrapped but find their way back into the grey market and are sold as new.

This poses catastrophic risks such as:

• Medical Devices: Faulty ICs in ventilators or MRI machines could lead to life-threatening failures.
• Data Centers: Counterfeit server capacitors increase fire risks and downtime.
• Automotive : Counterfeit image sensor ICs in cameras may misclassify objects, causing false emergency braking or lane-keeping errors. Refurbished microcontrollers may fail to accurately monitor cell voltage or temperature, leading to thermal runaway in Li-ion batteries.
• Aerospace: Counterfeit flight control chips causing navigation errors or system crashes.

Building Long-Term Resilience

There are a number of ways to cope with supply chain shortages and the risks they carry. A multi-source approach is always a smart option, but in the long run, it only helps soften the blow it doesn’t eliminate the risk. When a real crisis erupts, all vendors are likely to suffer. Holding a consigned inventory agreement with key manufacturers can mitigate short-term shortages, but it’s expensive and in times of crisis, maintaining such agreements is especially challenging.

To address the systemic risks posed by supply chain shortages – regardless of their cause, industries must adopt advanced technologies and proactive measures as way to build long-term resilience.

With the advent of artificial intelligence, AI-based solutions seem to fit the bill, For example, automated visual AI inspection offers a transformative way to detect counterfeit and tampered components at multiple stages of production. Unlike traditional inspections that rely on “golden units” or random sampling, AI-powered systems adapt to natural variations in components and boards, minimizing false positives and maximizing inspection accuracy.

• Component-Level Authentication: AI can analyze top markings and verify date codes, lot codes, and manufacturer part numbers helping mitigate the risks of unauthorized or aging parts.
• End-to-End Traceability: Post-assembly top-side imaging enables micro-level traceability, fundamentally controlling the materials in use.
• Bottom-Side Imaging: Utilizing bottom-side images a standard feature in any pick-and-place process to analyze each component and detect defects or probe marks that may indicate malicious firmware programming or covert hardware modifications.
• Board-Level Visual AI Authentication: Analyzing images of all produced boards to verify that all components are approved for use.
• 100% Coverage at Scale: No more sampling. Visual AI systems deliver high-throughput, real-time authentication in large-scale production environments.

Time to Break the Cycle

The tariff-driven component crisis underscores the fragility of globalized supply chains, but it’s far from the first and won’t be the last. The industry must stop reacting with panic every time a cycle hits. It’s time to enforce stability with technology, and AI is the key.

By embracing cutting-edge AI solutions, industries can detect counterfeits, manage aging components, and protect mission-critical systems across automotive, aerospace, medical, and data infrastructure—ensuring continuity and competitive advantage even in turbulent times.