The China Semiconductor Industry Association issued a document to its member units on April 11, emphasizing the customs declaration principles regarding the origin of imported chips.According to the relevant regulations of the General Administration of Customs, the origin of “integrated circuits” is determined based on the four-digit tariff number change principle, meaning the wafer fabrication location is recognized as the origin. In this regard, the China Semiconductor Industry Association recommends that the origin for customs declaration of “integrated circuits”, whether packaged or unpackaged, should be declared based on the location of the “wafer fabrication factory”.Reporters from the Science and Technology Innovation Board Daily noted that after the document was released, the market provided various interpretations, some of which were misinterpretations.Yang Shengxin, a senior analyst in the semiconductor division of Sigmaintell, stated in an interview with the Science and Technology Innovation Board Daily that the “four-digit tariff number change principle”, also known as the “Change of Tariff Classification (CTC) method”, refers to the determination of origin based on the step at which the tariff number changes to the type declared at customs (for example, changing from bare silicon wafers to unpackaged chips during the wafer fabrication stage).In fact, the customs standard for determining the origin of chips in China has not changed.An anonymous source from the China Semiconductor Industry Association told the Science and Technology Innovation Board Daily that the rules regarding the “origin” of semiconductor products published on April 11 were not a new policy recently released.The source stated that China has long been an importer of integrated circuits, maintaining zero tariffs, contributing significantly to the sustainable development and innovation of the global semiconductor industry. However, with the current unilateral disruption of the global trade system, this announcement aims to unify the industry’s understanding of the already clarified regulations by the government and to conduct business in accordance with the rules.According to Article 3 of the “Regulations on the Origin of Imported and Exported Goods of the People’s Republic of China”, goods wholly obtained in one country (region) are considered to originate from that country (region); goods produced in two or more countries (regions) are considered to originate from the country (region) where substantial transformation is last completed.Article 6 of the regulations mentions that the criteria for determining substantial transformation as specified in Article 3 are based on changes in tariff classification; if changes in tariff classification do not reflect substantial transformation, supplementary standards such as value percentage, manufacturing, or processing procedures are used. The specific standards are formulated by the General Administration of Customs in conjunction with the Ministry of Commerce.However, some industry insiders pointed out that although the standards have existed for some time, the actual determination of the origin of imported chips in China has been relatively arbitrary, with companies declaring based on design, wafer fabrication, and packaging testing situations. For instance, many overseas manufacturers choose to set up packaging and testing capacities in Southeast Asia. With the clarification that the wafer fabrication location is the origin, these manufacturers may no longer be able to determine the origin through packaging and testing stages.With the clarification of the standards for determining the origin of imported chips under unconventional trade tariff policies, the A-share market reacted swiftly.On April 11, the semiconductor sector experienced a surge in stock prices. Sixteen stocks on the Science and Technology Innovation Board rose by over 15%, including Weijie Chuangxin, Jinghua Micro, Naxin Micro, Sirui Pu, and Meixin Sheng, which hit the daily limit, while Huahong’s stock rose by over 19%, and companies like Jiewate, Jingfeng Mingyuan, Longxun Co., and Huafeng Measurement and Control rose by over 14%.A representative from a domestic wafer foundry told the Science and Technology Innovation Board Daily that the introduction of this international tariff policy is expected to benefit domestic analog chip manufacturers the most, followed by wafer foundries with rich analog platforms like Huahong Semiconductor.Regarding the reasons, a leader from a domestic analog chip company stated in an interview with the Science and Technology Innovation Board Daily that for high-end analog chips, chip design often needs to be closely integrated with manufacturing processes. Therefore, taking overseas manufacturers like Texas Instruments as an example, their manufacturing processes are usually supplied by their own or U.S.-based wafer production lines, making it difficult to transfer manufacturing capacity externally in the short term. It is expected that the supply and demand sides of related products will be significantly affected, and the demand for domestic solutions will increase.Yang Shengxin from Sigmaintell further added that from the perspective of the industry chain structure, wafer fabrication occurs in the U.S., while the chips are sold to customers in mainland China. Manufacturers include not only Texas Instruments but also Intel, ON Semiconductor, Micron, etc., and are expected to be more affected by tariff policies. If companies only focus on tariff issues to establish production capacity in mainland China, it is not ideal from the perspectives of cost, construction cycle, and policy risk. The risk of moving the industry chain due to short-term policy fluctuations is too high, making implementation unlikely.Some representatives from analog chip manufacturers indicated that although the market environment is changing rapidly in the short term, companies are still observing downstream reactions and find it difficult to draw conclusions about changes in demand. However, in the long run, the acceleration of domestic self-controlled development should be a major trend and opportunity for domestic chip companies.A representative from a mainland wafer foundry stated that they have been striving to attract customers from overseas markets like North America, and with the emergence of market opportunities, they are more motivated to engage in related business. Regarding policy risks, the industry will focus on developing more customers, accelerating product development, and steadily increasing production capacity. Additionally, from the actions of downstream customers, there have not yet been any urgent orders or price-cutting market actions; “everyone is observing, and perhaps soon we will see some signs.”