On April 11, the China Semiconductor Industry Association issued an &#34;Emergency Notice on the Identification Rules for the 'Country of Origin' of Semiconductor Products&#34; (hereinafter referred to as the &#34;Notice&#34;). The &#34;Notice&#34; indicates that, according to the relevant regulations of the General Administration of Customs, the country of origin of integrated circuits is determined based on the principle of the four-digit tariff number, meaning that the &#34;tape-out location&#34; of the chip is recognized as the country of origin.
&#34;Tape-out&#34; is a technical term in chip manufacturing. It refers to the process where a chip design company allows a chip manufacturing factory to produce a small batch of samples to verify the feasibility of the chip design, conducting comprehensive testing and evaluation of the chip's functions and performance. If the design is validated without issues, it then proceeds to large-scale manufacturing. Typically, the location where the tape-out occurs is also where the chip is produced.
According to China's latest tariff policy towards the United States, chips with a tape-out location in the United States, i.e., &#34;Made in USA,&#34; will be subject to a 125% tariff.
Several industry insiders told Caijing that the chip manufacturers affected include, but are not limited to, Intel, Micron, Texas Instruments (hereinafter referred to as TI), Analog Devices (hereinafter referred to as ADI), and ON Semiconductor, among other American companies. Among them, TI and ADI are the most affected, while some products from Broadcom and Intel will also be impacted. However, NVIDIA and AMD chips are primarily produced in Taiwan, so the impact is smaller.
Additionally, several chip experts believe that the tariffs will benefit the localization of analog chips. Stimulated by this news, on April 11, domestic analog chip stocks such as Shengbang Co., Ltd. (300661), Weijie Chuangxin (688153), Sirui Pu (688536), and Naxinwei (688052) hit the daily limit.
<h2>What Does &#34;Tape-out Location Recognized as Country of Origin&#34; Mean?</h2>
Chips are the product of highly globalized cooperation. The chip process includes design, manufacturing, and packaging/testing, with several specialized companies responsible for each stage. For example, the American mobile chip company Qualcomm is only responsible for chip design, while chip manufacturing is entrusted to specialized foundries like TSMC, and packaging/testing may be handled by a factory in Southeast Asia or China. Only a few chip companies, such as Intel and Samsung, adopt a model where they are responsible for both design and manufacturing (both companies also provide foundry services), but even for self-manufacturing, Intel has wafer fabs in the United States, Ireland, and Southeast Asia, meaning production locations are not limited to the U.S. mainland.
A common phenomenon in the chip industry is that a chip is often designed in the United States, manufactured in Taiwan or South Korea, and finally packaged and tested in Southeast Asia or China, before being assembled by Chinese workers into an electronic device and sold worldwide.
According to Article 3 of the &#34;Regulations on the Origin of Imported and Exported Goods of the People's Republic of China&#34;: Goods obtained entirely in one country (region) are considered to have that country (region) as their origin; goods produced in two or more countries (regions) are considered to have the country (region) where substantial transformation is last completed as their origin.
A representative from a semiconductor equipment manufacturer told Caijing that in the past, chips entering the Chinese market theoretically had to calculate tariffs based on the location of the value-added stage, which is usually the wafer manufacturing location. Additionally, previously, customs enforcement for chip imports was relatively lenient, often allowing manufacturers to self-declare, and there was some flexibility in the actual declaration process. The aforementioned semiconductor equipment representative revealed that, in practice, some companies declared based on the location of packaging and testing.
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Under the new regulations, the location of wafer fabrication will be recognized as the origin of chips for taxation purposes, with clear and definite standards. Chips that are actually &#34;Made in USA&#34; but are considered to have their origin in the testing and packaging location will fall under the taxation scope.
According to data from Chinese customs, in 2024, the import value of semiconductor products (including integrated circuits, semiconductor devices, semiconductor equipment, and components) in China is expected to be CNY 3,273.87 billion, while the export value is CNY 1,514.55 billion. Among these, direct imports from the United States amount to CNY 123.04 billion, accounting for 3.76%. Direct exports to the United States total CNY 23.14 billion, accounting for 1.53%.
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<h2>“Made in USA” Chip Deliveries Basically Suspended</h2>
Zhang Yu (pseudonym) is an executive at a chip agency that ranks among the top global chip distributors, representing chips from American companies such as TI, ADI, ON Semiconductor, and Broadcom for many years. Zhang Yu told Caijing that many chip packages indicate the &#34;wafer fabrication location&#34; and &#34;testing and packaging location,&#34; which people previously did not pay attention to. Now, for chips fabricated in the United States, customers have suspended deliveries and are in a wait-and-see mode.
Companies that place special emphasis on reserves may maximize the use of the &#34;tariff exemption&#34; policy. The &#34;tariff exemption&#34; policy is a short-term window, indicating that according to the latest tariff details, wafers/chips originating from the United States that are shipped before 12:00 PM Beijing time on April 10, 2025, and declared for import before May 13, 2025, can be exempt from tariffs. However, several interviewees indicated that customs companies currently do not know what materials need to be provided to apply for tariff exemptions.
A customs company representative revealed that because the tariff policy has just been released, some local customs offices do not know what proof materials to ask everyone to prepare.
Zhang Yu disclosed that the common practice among Chinese chip agents was to first ship goods to Hong Kong, waiting for customers to pick up and declare customs themselves. Whether it is chip agents or professional customs companies, it is indeed not easy to prove that the American chips in hand were shipped on April 10.
“Goods are shipped in large batches and are not divided so finely.” Zhang Yu said that also because previously, most chip imports were not taxed, the original proof materials were not that detailed.
A distributor from Intel told Caijing that changing the customs basis to the wafer fabrication location will impact the sales of Intel products fabricated in the United States and sold in China.
The aforementioned Intel distributor stated that most of their customers had just completed their procurement orders for Intel chips for the second quarter, so the demand and prices for second-quarter orders would not be significantly affected. However, the impact afterward is uncertain, “the situation is changing too quickly, and everyone can only wait and see”
He revealed that indeed many clients are considering stockpiling, but ultimately did not, &#34;Orders for the second quarter have already been executed, and no one dares to say what will change in three months. Everyone generally believes there is a turnaround, and rashly stockpiling carries greater risks.&#34;
<h2>Market Logic Changes</h2>
Several chip experts told Caijing that if the new tariff policy is implemented for a long time, domestic analog chips may have more opportunities.
Analog chips mainly consist of mature process products, characterized by low unit prices, a wide variety, small differences, slow iterations, and a pursuit of stability, with a relatively mature domestic supply chain. In the field of analog chips, domestic chips can replace some imported chips to a certain extent. However, the domestic analog chip market is dominated by international giants such as TI and ADI, especially in high-end products, where the market is almost entirely reliant on international manufacturers. Data shows that in the automotive electronics sector, the localization rate of analog chips is only 10%.
According to data from Zhiyan Consulting, the self-sufficiency rate of domestic analog chips is expected to grow from 9% in 2019 to 16% in 2024, with a rapid increase in the self-supply ratio, but still with significant room for improvement.
A senior chip industry expert told Caijing that the degree of localization of analog chips improved in previous years, but later domestic downstream manufacturers chose TI analog chips because companies like TI launched price wars in the domestic mid-to-low-end market, offering similar products at lower prices.
On January 16 of this year, a spokesperson for the Ministry of Commerce publicly stated in response to reporters' questions regarding the impact of low-priced imports of mature process chips from the U.S. on the domestic market, &#34;The Biden administration has provided substantial subsidies to the chip industry, giving U.S. companies an unfair competitive advantage, and they are exporting related mature process chip products to China at low prices. The investigation agency will review this in accordance with China's relevant laws and regulations and follow WTO rules, and will initiate an investigation according to the law.&#34;
TI has multiple wafer manufacturing bases in the U.S., such as the new 12-inch semiconductor wafer manufacturing facility located in Sherman, Texas. TI also plans to build four factories in the U.S. Another American analog chip company, ADI, also has several manufacturing bases in the U.S., located in Massachusetts, California, North Carolina, and other places.
To achieve a global layout, reduce costs, and be close to markets in different regions, TI has factories in Chengdu, China, and ADI has factories in Ireland and the Philippines, but industry insiders say that the chips from both companies are primarily manufactured in the U.S.
In addition to TI and ADI, Intel is also one of the U.S. chip manufacturers significantly affected. Intel is a beneficiary of the U.S. domestic chip production support policy. Intel's x86 architecture server chips and PC chips have a large market share in China. Purchasing companies include Lenovo, Inspur, and H3C. In 2024, Intel's revenue in mainland China and Hong Kong is expected to be $15.5 billion, accounting for 29% of its overall revenue.
A person from a large electronic component procurement trading group confirmed to Caijing that they have already received relevant notifications and are assessing the impact and risks. He stated, &#34;Currently, Intel's Xeon CPUs sold in China will be significantly impacted.&#34;
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However, multiple chip industry insiders have stated that Intel has wafer fabs in Ireland, Israel, and Dalian, China, particularly in Ireland, where Intel operates five wafer fabs. Its Fab 34 wafer fab is currently the most advanced semiconductor manufacturing facility in Europe and is the only semiconductor base in Europe equipped with EUV lithography machines for mass production. This means that in the long term, Intel has room to maneuver and can sell non-U.S. manufactured chips in China.
<h2>Impact on U.S. Chip Manufacturing Reshoring Strategy</h2>
In the 1990s, chip manufacturing was almost entirely concentrated in the United States, Japan, and Europe. At one point, the U.S. held a 40% share of the global semiconductor market, but as the semiconductor manufacturing industries in mainland China, Taiwan, and South Korea rapidly rose, the U.S. global share sharply declined to around 10%-14% today.
This relatively small market share is mainly contributed by two companies. One is the foundry Global Foundries. Global Foundries is headquartered in Silicon Valley, California, and has manufacturing plants in New York and Vermont. According to TrendForce data, Global Foundries ranks among the top ten foundries globally, but due to the highly concentrated global foundry market, its market share in 2024 is only about 3.7%.
The other company is Intel. Public information shows that Intel has 15 operational wafer fabs in 10 countries and regions worldwide. At least three of these are located in the U.S., specifically in Chandler, Arizona; Rio Rancho, New Mexico; and Hillsboro, Oregon. Among them, Intel's D1X research and development center in Hillsboro is one of the most advanced semiconductor R&amp;D bases globally, producing high-end CPUs such as Core and Xeon, as well as data center GPUs. Intel's wafer fab in Chandler, Arizona, produces consumer-grade chips like the 14th generation Core.
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The decline of U.S. domestic chip manufacturing capability is reflected not only in market share but also in technological capability. The global &#34;foundry king&#34; TSMC has already surpassed Intel in technology: TSMC's 3nm and 5nm nodes are already in production; although Intel is advancing its 18A process, its current production capacity still lags behind; TSMC also plans to advance to a 2nm process.
In the past three years, revitalizing U.S. domestic chip manufacturing has become a common stance of both the Democratic and Republican parties.
In 2022, the Biden administration passed the CHIPS and Science Act (hereinafter referred to as the &#34;CHIPS Act&#34;), which encourages Intel, TSMC, and Samsung to invest in building advanced process wafer fabs in the U.S. through substantial financial subsidies. The act also explicitly states that chip companies receiving U.S. government subsidies are prohibited from building advanced process wafer fabs in China for the next 10 years.
The &#34;tariff threat&#34; is a common tactic used by Trump. On April 9th of this year, Trump openly stated on social media that he had warned TSMC: &#34;If you don't build factories in the United States, you will face a 100% tariff.&#34;
Under the &#34;carrot and stick&#34; strategy of both parties in the United States, the number of high-end chip manufacturing plants under construction in the U.S. has rapidly increased.
Intel is one of the biggest beneficiaries of the U.S. chip bill. In March 2024, a public information release from the U.S. Department of Commerce revealed that the U.S. government had reached a non-binding preliminary terms memorandum (PMT) with Intel, which would provide Intel with up to $8.5 billion in direct funding and up to $11 billion in loans. Currently, Intel is building a &#34;chip super factory&#34; in Ohio, with a total investment of $28 billion, planning to construct 8 wafer fabs, expected to be operational between 2027 and 2028; additionally, Intel plans to expand its factory in Arizona, investing $20 billion to upgrade its manufacturing processes.
TSMC has received a total of $6.6 billion in subsidies and $5 billion in loans from the U.S. government. In March of this year, TSMC CEO (Chief Executive Officer) Wei Zhejia announced after meeting with U.S. President Trump that TSMC would increase its investment by at least $100 billion on top of its existing $65 billion investment in the U.S. This totals $165 billion for the construction of three chip factories, two advanced packaging plants, and R&amp;D centers.
So far, Samsung has received $4.745 billion in subsidies from the U.S. government and is currently building two wafer fabs in Tyler, Texas. The first wafer fab was announced for investment in 2021, focusing on producing chips at 4nm and below nodes, but mass production has been delayed to 2026 due to yield issues. The second wafer fab is expected to be operational in 2027. Additionally, there are reports that Samsung plans to build two new wafer fabs in the U.S. for producing high-end memory chips.
With the production of the aforementioned wafer fabs, the share of high-end chips manufactured in the U.S. in the global market is bound to increase significantly. Although the U.S. is blocking high-end chips from flowing into China, China, as the world's largest chip importer and an important chip consumer, has already expressed a certain attitude towards high-end chips produced in the U.S.
Source: Financial Magazine,
Original Title: &#34;New Regulations on China's Chip Imports Take Effect, Targeting Not Only Tariffs but Also the Strategy of Returning U.S. Chip Manufacturing&#34;
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On April 11th, the China Semiconductor Industry Association released new regulations, stating that the origin of chips will be determined based on the location of wafer fabrication. According to the new tariff policy, chips fabricated in the United States will be subject to a 125% tariff, affecting several American chip manufacturers, such as Intel and Texas Instruments. This policy may promote the development of domestic analog chips, with related stocks hitting the daily limit after the announcement. The globalization cooperation model in the chip industry has diversified production locations, with a few companies like Intel and Samsung responsible for design and manufacturing

- On April 11, the China Semiconductor Industry Association issued an urgent notice regarding the origin certification rules for semiconductor products, stating that the "wafer fabrication location" will determine the origin of integrated circuits.  
- This change means that chips fabricated in the U.S. will incur a 125% tariff under China's new customs regulations, significantly impacting U.S. companies like Intel and Texas Instruments.  
- Experts suggest that this policy may boost the domestic production of analog chips in China, as companies adjust to the new tariff landscape and seek to minimize reliance on imported components.

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New regulations on China's chip imports take effect, targeting not only tariffs but also the strategy of bringing back U.S. chip manufacturing