The Chinese chip industry’s clarification seems a little more subdued than that on those potential retaliatory tariffs. Instead of a flat tax on the manufacturer’s country of origin, it targets the actual processing of the silicon wafers, which they call a “wafer fab.”
When you appreciate how global the semiconductor supply chain truly is, that difference is enormous. A US company may design a chip, but it could be fabricated in Taiwan, South Korea, or even China itself with tools from around the world. China, meanwhile, is drawing its line in the sand at the wafer fabrication: that could provide a degree of protection for US companies making chips with some level of processing beyond the US and so lessen the impact of these tariffs.
Here, perhaps, is the interesting bit: the CSIA—the state-backed association that you rightly compare to the NAACP for all things semiconductor—is in tow with this “wake-up call.” It really makes a difference for the Chinese chipmakers—and by extension, the tech landscape overall.
This adds more frost to what was already an icebreaker US-China trade relationship, at least with respect to this most critical link in the semiconductor supply chain. With all its fame in terms of technological prowess, Neil, it is one of those chains that you, too, as he said, “has its strengths but also exposes weak tendons to the threats coming from the current geopolitical frictions” One can hardly help but wonder what it would look like in this intricate and dangerous game.
Impact on Specific Chipmakers
It is important to consider EETop, a Chinese chipmakers’ information platform, which says that customs authorities in the country would refer to the chips made in Taiwan as the origin of products from some US chip designers like Qualcomm and AMD, who essentially must rely on Taiwanese chip manufacturing giant TSMC. Hence, companies in China importing these chips would be immune to Beijing’s retaliatory levies on US goods.
However, EETop went on to point out that chips fabricated in the US—such as those made by companies like Intel, Texas Instruments, Analog Devices, and ON Semiconductor—would be deemed to originate in the US, which could expose these chips to heavy tariff rates in this category. However, there was an optimistic phase after the news.
How The Market Acted Following The News
This caused the stock market to go on a tantrum. Sent from my iPhone: AMD, a big TSMC customer, and AI chipmaker Nvidia both saw their shares rise gleefully. Meanwhile, Intel was stripped of its shares, which other analog chipmakers lost, with Texas Instruments, Analog Devices, and automotive chipmaker Onsemi also seeing their own shares decline.
These moves reflect how the entire investing community assesses how this clarification of the tariffs might affect the competitive environment for chips. How China is cautious to process with its calculations.
The Strategic Calculations of China
After an initial turbulence , Chinese chipmaker stocks rose sharply later in the session as the CSIA attempted to clarify its statement. US chips that will face heaving tariffs are now easier to identify, He Hui, semiconductor research director at tech research company Omdia, said of the notice from CSIA.’ Those chips, “some of which we can see will be even taxed regardless built within the United States as packaged actually China,” he said.
Some foreign semiconductor firms would pursue a strategy of “China for China,” which could boost Chinese domestic chipmaking and supply chains. The approach is fundamental: using Chinese goods for Chinese consumers in China.
Beijing has also been steadily expanding domestic production of mature—or legacy—semiconductors, also known as node chips. These chips, utilizing legacy processes, compete against analog chips from companies, including Texas Instruments.
According to Running Point Capital chief investment officer Michael Ashley Schulman, “China’s periodic waiver of U.S. chipmakers under foreign OEM continues to supply strategic cover in maintaining economic peace and attracting foreign investment in domestic capacity.” It is important now to consider the industry implications.
Industry Implications
Also, globally, much of the mature-node semiconductor family is tied up in design-and-manufacture vertically integrated device manufacturers (IDMs) like Texas Instruments. A report by the US-based Center for Strategic and International Studies said that contract manufacturers host the most significant portion of this capacity in China.
Analysts at Bernstein said investors were surprised by the announcement of the CSIA, but “most of them assumed the location of the packaging was to be viewed as the country of origin, not the point of the fabric.” That kind of clarification would introduce troubles for businesses like Intel Corp and Texas Instruments that still seek to defer the Chinese tariffs, which likely means some manufacturing and logistics would have to be altered. More importantly, such a situation may also clear the way for competition, especially by Japanese chipmakers such as Renesas. Some more development is going on around national security with respect to the electron supply chain. This emphasis also reflects the geopolitical significance of the semiconductor industry as an enabler industry and the associated necessity of guarding its supply chains. These developments illustrate the multifaceted interplay of economics, technology, and strategy characteristic of prescience in the semiconductor industry.
Some US chipmakers, especially those engaging in outsourced production, have also gained a measure of certainty from a degree of clarity on the tariffs to be applied to the Chinese semiconductor sector. However, it also creates a little bit of a headwind for some of the other US-based growers that have their production facilities there. All of this — on top of the same generic semiconductor tariffs and supply chain security narrative — resonates around the changing paradigms of the tech Earth. This process is going to be dragging on for years, and there will be a lot of focus on strategy and being one step ahead of competitors
