China’s Semiconductor Industry Association (CSIA) recently announced that U.S. chipmakers like Qualcomm, Nvidia, and AMD will be exempt from retaliatory tariffs if they outsource manufacturing. However, companies like Intel and Texas Instruments, which manufacture chips in the U.S., will not be granted exemptions. This policy hinges on the location of the wafer fabrication plant, with the declared country of origin determined by where the chips are fabricated. For firms like Qualcomm and AMD, whose chips are produced by Taiwanese giant TSMC, China will classify these chips as originating from Taiwan, not the U.S.
The announcement has created notable market reactions, especially among major semiconductor firms. Shares of AMD and Nvidia saw increases of 6% and 2.6%, respectively, due to the exemption for outsourced chips. In contrast, shares of Intel fell by more than 6%, and Texas Instruments saw a drop of over 8%. Other U.S. firms like ON Semiconductor also experienced declines in stock value. The new policy is expected to significantly affect U.S. chipmakers that manufacture domestically, raising concerns over the application of tariffs on U.S.-origin chips.
China’s retaliation comes in the context of rising trade tensions with the U.S., with Beijing increasing tariffs on U.S. imports to 125%.
The clarification from CSIA has helped define which U.S. chips will be subject to tariffs, reducing uncertainty for Chinese importers. According to analysts, this policy shift may encourage U.S. semiconductor firms to pursue a “China for China” strategy, manufacturing specifically for the Chinese market. This could benefit domestic Chinese chipmakers and alter the global semiconductor supply chain.
The move has caught many industry analysts by surprise, as the general expectation was that the country of origin would be based on packaging rather than where chips are fabricated. Bernstein analysts indicated that this could make it more difficult for companies like Intel and Texas Instruments to avoid tariffs. In the longer term, this could lead to changes in manufacturing locations and logistics, potentially benefiting Chinese and Japanese semiconductor companies over their U.S. counterparts.
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