In the context of escalating global trade tensions, the Chinese Ministry of Commerce has announced a 125% tariff on imported goods originating from the United States, defining the origin based on the wafer fabrication location. The implementation of this policy has profound implications for the semiconductor industry, particularly in the analog chip sector.
As a crucial component of the semiconductor industry, the localization process of analog chips is expected to accelerate as a result of this policy. Some brokerages believe that “this round of analog chips will be an unexpectedly large-scale market“.
Semiconductor origin is defined bythe wafer fabrication location
Accelerating the localization process of analog chips
The rules for determining the origin of semiconductor products have always been a significant issue in international trade.
On April 11, the China Semiconductor Industry Association issued an urgent notice clarifying the rules for determining the “origin” of semiconductor products, which will now be based on the wafer fabrication location rather than the previous packaging location. This change means that even if the chip’s packaging and testing are completed in China or Southeast Asia, as long as the wafer fabrication occurs in the United States, its origin will still be recognized as the United States. Therefore,chips fabricated in the U.S. will be subject to a 125% tariff.
Analog chips often adopt the IDM (Integrated Device Manufacturing) model, which is a vertically integrated approach from design to manufacturing to packaging and testing. Among the top ten global analog chip companies, half are U.S. companies, including Texas Instruments (TI), Analog Devices (ADI), Micron Technology, and Microchip Technology. Currently, the total revenue of major U.S. analog chip companies (TI/ADI/ON Semiconductor/Microchip) is approximately $264 billion, while the total revenue in mainland China is about $57 billion.
These companies have a large number of wafer fabs in the U.S., and the cost of their products in the Chinese market will significantly increase due to the new tariff policy.
According to a research report from Huatai Securities, the current localization rate of analog chips in China is only about 20%, indicating a vast potential for domestic substitution. With the implementation of the new policy, domestic analog chip manufacturers will face unprecedented development opportunities. On one hand, the rising costs of imported chips will make domestic customers more inclined to choose cost-effective domestic alternatives; on the other hand, domestic analog chip manufacturers will have more opportunities to enter the high-end market, enhancing their technological capabilities and market competitiveness.
The new tariff regulations will significantly increase
the costs of U.S.-basedIDMmanufacturers’ products in the Chinese market
The implementation of the new tariff policy will have a significant impact on the competitiveness of U.S.-based IDM manufacturers in the Chinese market. Taking Texas Instruments as an example, the company has been aggressively upgrading and expanding its capacity in the U.S. since 2023, maintaining an annual capital expenditure of about $5 billion, shifting production lines from 8-inch to 12-inch, and reducing product costs by 40%, with a goal of achieving a 95% self-owned capacity rate by 2030. However, since most of its packaging capacity is still located in China and Southeast Asia, the new policy will significantly increase its product costs in the Chinese market.
According to data from the Center for Strategic and International Studies (CSIS), Texas Instruments has 85% of its packaging and testing capacity in Asia, with almost no capacity in the U.S. Therefore, even if its products are packaged in regions outside the U.S., their origin will still be recognized as the U.S., facing a 125% high tariff. This will significantly weaken its price competitiveness in the Chinese market, creating more market space for domestic analog chip manufacturers.
Moreover, the new policy will also promote the construction of domestic independent wafer production lines. As the market share of domestic analog chip manufacturers expands, the demand for wafer manufacturing will also increase. This will encourage domestic wafer foundries to increase investment, enhance technological capabilities and production capacity, further promoting the localization process of the semiconductor industry chain.
Localization of semiconductors is a long-term and certain trend
In the current and future international situation, the localization of semiconductors has become a long-term and certain trend. With the intensification of global trade friction, China’s demand for self-controlled semiconductors is becoming increasingly urgent. The new regulations on the origin of chips are expected to accelerate the domestic market’s shift towards domestic analog chips and promote the construction of independent wafer production lines.
In recent years, domestic analog chip manufacturers have made significant progress in technological research and market expansion. For example, companies like Singatron, Sirepu, and Naxinwei have reached internationally advanced levels in product performance and market competitiveness. With the implementation of the new policy, these companies are expected to further expand their market share and improve profitability.
Recently, many brokerages are optimistic about industry development
Brokerages generally hold an optimistic view on the future development of the analog chip industry, as reflected in recent research reports:
Huatai Securities believes that there is significant potential for domestic substitution in the analog chip sector, with current demand from automotive and industrial clients gradually recovering, the industry entering a phase of mergers and acquisitions, optimizing the competitive landscape, and domestic substitution expected to accelerate.
Dongwu Securities believes that the 125% tariff directly cuts off the source of price wars, and may cause supply disruptions in the near term, leading to a positive cycle of “tariff increase—price rise—channel/customer stockpiling—continued price rise” for analog prices, which may greatly restore the profit margins of analog companies, “this round of analog chips will be an unexpectedly large-scale market“.
Combining market research reports and institutional views, key companies include:
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Singatron (leading in signal chain and power management, significant breakthroughs in automotive-grade products)
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Sirepu (high-performance analog chip design platform, quality downstream customer structure)
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Naxinwei (pioneer in domestic substitution for sensors and signal conditioning chips)
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Chipsea Technology (leading company in BMS and industrial measurement chips)
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Aiweier Electronics (rapid penetration of consumer electronics analog chips)
Conclusion
From the definition of “wafer fabrication location” to tariff countermeasures, the policy combination is opening a golden window for the localization of analog chips. With downstream demand recovering and industry consolidation deepening, coupled with the release of independent wafer capacity, domestic analog chip manufacturers are expected to experience a double boost in performance and valuation under the dual logic of “certain substitution” and “growth potential”. In the context of a complex international situation, semiconductor self-control is not only an industrial proposition but will also become a long-term focus of the capital market.
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