Chip manufacturers affected by this in the short term include but are not limited to Texas Instruments, Analog Devices Semiconductor, Intel, Micron and other companies, which will disrupt the pace of chip manufacturing in the United States in the long run

Text: "Caijing" researcher Zhou Yuan, Wu Junyu, Gu Lingyu

Edited by Lilly Tse

On April 11, the China Semiconductor Industry Association (CMIA) issued the "Emergency Notice on the Rules for the Determination of the "Country of Origin" of Semiconductor Products (hereinafter referred to as the "Notice"). According to the Notice, according to the relevant regulations of the General Administration of Customs, the origin of integrated circuits is determined in accordance with the principle of changing the four-digit tariff code, that is, the "place of tape-out" of the chip is recognized as the country of origin.

"Tape-out" is a technical term in chip manufacturing. In order to verify the feasibility of the chip design, the chip design company allows the chip manufacturing factory to produce samples on a small scale, conduct comprehensive testing and evaluation of the chip's function and performance, and then enter the large-scale manufacturing process if the design scheme is verified to have no problems. In general, where the chip is taped out, that is, where it is produced.

According to China's latest tariff policy on the United States, chips that are taped out in the United States, that is, "Made in USA" chips, will be subject to a 125% tariff.

A number of industry insiders pointed out to Caijing that the chip manufacturers affected by this include but are not limited to Intel, Micron, Texas Instruments (hereinafter referred to as TI), Analog Devices (hereinafter referred to as ADI), onsemi and other American companies. Among them, TI and ADI are the most affected, and some products of Broadcom and Intel will also be affected, but Nvidia and AMD chips are mainly produced in Taiwan, China, and the impact is small.

Another chip expert believes that tariffs will be good for the localization of analog chips. Stimulated by the news, on April 11, Shengbang shares (300661), Weijie Chuangxin (688153), Siruipu (688536), NOVOSENSE (688052) and other domestic analog chip stocks rose to the limit.

What does it mean to "point out the place of origin in tape-out".

Chips are the product of highly global collaboration. The chip includes design, manufacturing, packaging and testing, and a number of professional companies are responsible for each link. For example, Qualcomm, an American mobile phone chip company, is only responsible for chip design, and chip manufacturing is handed over to professional foundries such as TSMC, and packaging and testing may be handed over to a packaging and testing factory in Southeast Asia or China. Only a few chip companies, such as Intel and Samsung, adopt a model of designing and manufacturing all their own (the two companies also provide chip foundry services), but even if they manufacture themselves, Intel has wafer factories in the United States, Ireland, and Southeast Asia, and the production location will not be limited to the United States.

A common phenomenon in the chip industry is that a chip is often designed in the United States, manufactured in Taiwan or South Korea, finally packaged and tested in Southeast Asia or China, and finally installed in an electronic device by Chinese workers and then sold to the world.

According to Article 3 of the Regulations of the People's Republic of China on the Origin of Imported and Exported Goods, goods obtained entirely in one country (region) shall be the country (region) as the place of origin; For goods produced with the participation of two or more countries (regions), the country (region) that has finally completed the substantial change shall be the place of origin.

A semiconductor equipment manufacturer told Caijing that in the past, chips entering the Chinese market theoretically had to calculate tariffs according to the link with the largest value-added, which is usually the location where the wafer is manufactured. In addition, the previous chip entry law enforcement is relatively relaxed, and it is often declared by the manufacturers themselves, and there is still a certain amount of floating space in the actual declaration process.

Under the new regulations, the tape-out place will be taxed as the origin of the chip, and the standard is clear and clear, and those chips that are regarded as the origin of the sealed test place and are actually "Made in USA" will be included in the scope of taxation.

According to China Customs data, in 2024, China's semiconductor products (including integrated circuits, semiconductor devices, semiconductor equipment and parts) will import 3,273.87 billion yuan and export 1,514.55 billion yuan. Among them, direct imports from the United States were 123.04 billion yuan, accounting for 3.76%. direct exports to the United States were 23.14 billion yuan, accounting for 1.53%.

"Made in USA" chip pick-ups have been largely suspended

Zhang Yu (pseudonym) is an executive of a chip agent, which belongs to the world's leading chip agents, and has been acting as an agent for chips from American companies such as TI, ADI, onsemi, and Broadcom for many years. Zhang Yu told "Caijing" that many chip packages are marked with "tape-out place" and "sealed test place", and people didn't care about this information before. Now, for chips taped out in the United States, customers have suspended pick-up and are in a wait-and-see state.

Companies that place a special emphasis on reserves are likely to make the most of the "tariff exclusions" policy. The "tariff exemption" policy is a short-term window period, which means that according to the latest tariff rules, wafers/chips originating in the United States can be exempted from tariffs if they depart before 12 o'clock Beijing time on April 10, 2025, and complete the import declaration before May 13, 2025. However, a number of interviewees said that customs brokers do not know what information they need to provide to obtain tariff exemptions.

A person from a customs declaration company revealed that because of the tariff policy, the customs in some places do not know what certification materials to prepare.

Zhang Yu revealed that the common practice of Chinese chip agents before was to first ship the goods to Hong Kong, China, and wait for customers to pick up the goods and declare customs by themselves, whether it is a chip agent or a professional customs declaration company, it is indeed not easy to prove that the American chips in their hands were shipped on April 10.

"The goods are all shipped in large quantities, and they will not be so fine." Zhang Yu said that because most of the chip imports were not taxed before, the original certification materials were not so detailed.

An Intel distributor told Caijing that changing the customs declaration basis to tape-out will affect the sales of products sold by Intel in the United States and China.

The above-mentioned Intel distributors said that most of their customers have just completed orders for the purchase of Intel chips in the second quarter, so the demand and price of orders in the second quarter will not be greatly affected. But after that, the impact is not easy to say, "the situation is changing too fast, everyone can only wait and see at the moment".

He revealed that many customers did consider stockpiling goods, but in the end they did not stockpile, "The orders for the second quarter have been executed, and no one dares to say the changes after three months." Everyone still generally believes that there is a turning point in this matter, and there is a greater risk of rushing to hoard goods."

The logic of the market changes

A number of 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 are mainly based on products with mature processes, with low unit price, many categories, small differences, slow iteration, and the pursuit of stability, and the domestic supply chain is relatively mature. 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 manufacturers such as TI and ADI, especially in terms of high-end products, the market is almost completely dependent on international manufacturers, and some data show that in the field of automotive electronics, the localization rate of analog chips is only 10%.

According to the data of Zhiyan Consulting, from 2019 to 2024, the self-sufficiency rate of domestic analog chips will increase from 9% to 16%, and the proportion of self-supply will grow rapidly, but there is still a lot of room for improvement.

A senior chip industry expert told Caijing that the degree of localization of analog chips has improved in the past few years, and later domestic downstream manufacturers chose TI analog chips, because TI and other companies launched a price war in the domestic low-end market, and the price of similar products is lower.

On January 16 this year, the spokesperson of the Ministry of Commerce publicly said in response to reporters' questions about the domestic chip industry's reflection on the impact of the domestic market on the domestic market with mature process chips imported from the United States, "The Biden administration has given a lot of subsidies to the chip industry, so that American companies have gained an unfair competitive advantage, and the relevant mature process chip products exported to China at low prices, the investigation agency will review in accordance with China's relevant laws and regulations, follow the rules of the WTO, and will launch an investigation in accordance with the law."

TI has multiple wafer fabrication sites in the U.S., such as a new 12-inch semiconductor wafer manufacturing facility in Sherman, Texas, and plans to build four factories in the U.S.; ADI, another U.S. analog chip company, also has multiple manufacturing bases in the United States, located in Massachusetts, California, North Carolina, and other places.

In order to achieve a global layout, reduce costs and be close to the market in different regions, TI also has factories in Chengdu, China, and ADI in Ireland and the Philippines, but industry sources say that the chips of the two companies are mainly made in the United States.

In addition to TI and ADI, Intel is also a major American chip manufacturer. Intel is a beneficiary of the U.S. domestic chip production support policy. Intel's x86 architecture server chips and PC (personal computer) chips have a large market share in China. Purchasing companies include Lenovo, Inspur, Xinhua III and other companies. In 2024, Intel's revenue in Chinese mainland and Hong Kong will be $15.5 billion, accounting for 29% of its overall revenue market.

A person from a large electronic components procurement and trading group confirmed to Caijing that it has received relevant notices internally and is assessing the impact and risks. He said that Intel's Xeon CPUs, which are currently sold in China, will be significantly impacted.

But a number of chip industry insiders said that Intel has wafer fabs in Ireland, Israel and Dalian, China, especially in Ireland, Intel operates five fabs, and its Fab 34 fab is currently the most advanced semiconductor manufacturing facility in Europe, and it is also the only semiconductor base in Europe that has installed EUV lithography machines for high-volume production. This means that in the long run, Intel has room to sell non-U.S.-made chips to China.

impact on the reshoring strategy of U.S. chip manufacturing

In the 90s of the last century, chip manufacturing was almost entirely concentrated in the United States, Japan and Europe. The share of the United States in the global semiconductor market was once as high as 40%, but with the rapid rise of the semiconductor manufacturing industry in Chinese mainland, Taiwan, South Korea and other places, the global share of the United States has dropped sharply to about 10%-14% now.

This is not a large market share, which is mainly contributed by two companies. One is the wafer foundry Global Foundries. GLOBALFOUNDRIES is headquartered in Silicon Valley, California, with manufacturing facilities in New York and Vermont. According to TrendForce data, GLOBALFOUNDRIES is among the top 10 foundries in the world, but due to the high concentration of the global foundry market, GLOBALFOUNDRIES' market share in 2024 will only be about 3.7%.

The other is Intel. According to public information, Intel has 15 working wafer fabs in 10 countries and regions around the world. There are at least three in the continental United States, in Chandler, Arizona, Rio Rancho, New Mexico, and Hillsboro, Oregon. Among them, Intel's D1X R&D center in Hillsboro is one of the most advanced semiconductor R&D bases in the world, and its wafer fab cluster produces high-end CPUs such as Core and Xeon, as well as data center GPUs. Intel's fab in Chandler, Arizona, produces consumer chips such as the 14th Gen Core.

The decline of U.S. domestic chip manufacturing capacity is reflected not only in market share, but also in technical capabilities. TSMC, the world's "king of foundries", has long surpassed Intel in terms of process: TSMC's 3nm and 5nm nodes have been put into production; Although Intel is promoting the 18A process, the current production capacity is still lagging behind; TSMC also plans to advance the 2nm process.

In the past three years, revitalizing local chip manufacturing in the United States has become a common proposition of the US Kuomintang and the Republican Party.

In 2022, the Biden administration passed the CHIPS and Science Act (hereinafter referred to as the "CHIPS Act") to encourage Intel, TSMC and Samsung to invest in the construction of advanced process fabs in the United States in the form of huge financial subsidies. The bill also clearly stipulates that chip companies that receive subsidies from the U.S. government are not allowed to build advanced process fabs in China in the next 10 years.

The "threat of tariffs" is Trump's usual tactic. On April 9 this year, Trump openly said on social media that he had warned TSMC: "If you don't come to the United States to build a factory, you will be charged 100% tariffs."

Under the bipartisan "carrot and stick" strategy in the United States, the number of high-end chip manufacturing plants under construction in the United States has risen rapidly.

Intel is one of the biggest beneficiaries of the U.S. CHIPS Act. In March 2024, a public information from the U.S. Department of Commerce showed that the U.S. government and Intel reached a non-binding preliminary memorandum of terms (PMT) to provide Intel with up to US$8.5 billion (about 61.2 billion yuan) of direct funds and up to 11 billion US dollars (about 79.2 billion yuan) of loans. At present, Intel is building a "chip super factory" in Ohio, with a total investment of 28 billion US dollars, and plans to build a total of 8 wafer fabs, which are expected to be put into operation from 2027 to 2028; In addition, Intel plans to expand its factory in Arizona and invest $20 billion to upgrade its manufacturing process.

TSMC has received a total of $6.6 billion in subsidies and $5 billion in loans from the U.S. government. In March this year, TSMC CEO (CEO) Wei Zhejia announced after meeting with US President Trump that TSMC would increase its investment of at least $100 billion in addition to the existing $65 billion in the United States. That's a total of $165 billion for the construction of three chip fabs, two advanced packaging fabs and R&D centers.

Samsung has so far received $4.745 billion in subsidies from the U.S. government and is currently building two fabs in the U.S., both in Taylor, Texas. The first fab was announced in 2021 to invest in construction, focusing on the production of chips at 4nm and below nodes, but mass production has been postponed to 2026 due to yield problems. The second fab is expected to come on stream in 2027. There are also public reports that Samsung also plans to build two new wafer fabs in the United States to produce high-end memory chips.

With the commissioning of the above-mentioned fabs, the proportion of high-end chips made in the United States in the global market will inevitably increase significantly in the future. Although the United States has prevented the flow of high-end chips into China, China, as the world's largest chip importer and important chip consumer, has shown a certain attitude towards high-end chips made in the United States.