Event: On April 11, the China Semiconductor Industry Association issued an “Emergency Notice on the Origin Certification Rules for Semiconductor Products.” 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 that the wafer fabrication location is recognized as the origin. It is recommended that the origin of “integrated circuits,” whether packaged or unpackaged, be declared based on the location of the “wafer fabrication factory” during import customs clearance.Market attention is focused on the origin issue in China’s tariff countermeasures. We believe that according to the “Specific Origin Rules for Products” and the “Regulations on Substantial Change Standards in Non-Preferential Origin Rules” defined by Chinese customs, as well as the official recognition of wafer fabrication location as the origin by the China Semiconductor Industry Association, wafer products produced in the US are likely to be recognized as the origin standard. We believe that US IDM products may face significant tariff impacts during implementation.The proportion of domestic manufacturing and packaging of North American analog, RF, and CPU chips is relatively high. Among the major North American semiconductor giants, many in the large chip and mature process product fields possess US IDM capabilities. For example, TI’s wafer fabs are mainly located in Texas, Maine, and Utah, with a few in Germany, and packaging mainly occurs in the US, with some in Malaysia, the Philippines, and Chengdu, China. Statistically, most of Intel’s CPU and GPU products, some of AMD’s embedded processors, most of TI and ADI’s analog chip products, some RF and automotive electronic chips from Broadcom, a small portion of DRAM and NAND chips from Micron, most power products from ON Semiconductor, and RF front-end products from Qorvo are all potentially subject to additional tariffs in China.Domestic mature process products may benefit from the new tariff policy, with potential for market share increase and price hikes in the industry. Under the new tariff policy, the prices of US products may rise in the future, increasing cost pressure on domestic customers using US products. Considering the improved cost-performance ratio of domestic chips and the potential for price increases of corresponding domestic products, we believe that US-made analog/RF/CPU/power/storage products with a complete industrial chain may be affected, providing opportunities for domestic companies in corresponding categories to increase their market share.In the upstream semiconductor sector, leading US semiconductor equipment manufacturers such as AMAT, LAM, KLA, and Axcelis are globally dominant in deposition, etching, measurement, thermal processing, and ion implantation. According to Chinese customs data, mainland China has a high dependence on imports of US PVD, thermal processing/oxidation diffusion, ion implantation, and measurement equipment. In 2024, the share of US equipment in mainland China’s imports is expected to be 14% for PVD, 28.3% for thermal processing/oxidation diffusion, 78.8% for ion implantation, and 37.3% for optical inspection. Additionally, mainland China also has a certain dependence on US CVD/ALD and etching equipment. Considering the potential for increased tariffs in the semiconductor field in the future, the cost of importing US equipment for mainland China fabs will rise, likely increasing the procurement of domestic equipment; at the same time, since the US export controls, the revenue share of leading US semiconductor equipment companies in mainland China is expected to drop from over 40% in 2024 to around 20-30%, creating new opportunities for domestic equipment substitution.Investment Recommendations:① The analog chip sector is expected to see a significant improvement trend in 2025, with potential for market share increase. Companies to watch include Sanken Electric, Siretta, Naxin Micro, Jiewa Technology, Longxun Co., and Meixin Sheng, as well as RF chip companies like Zhaosheng Micro; ② Leading semiconductor equipment manufacturers such as North Huachuang, Zhongwei Company, Tuo Jing Technology, Huahai Qingke, and Shengmei Shanghai, as well as domestic breakthroughs in specific fields like Chip Source Micro, Zhongke Feice, Jingce Electronics, Tianzhun Technology, Changchuan Technology, Huafeng Measurement and Control, Xidian Co., and Jingzhida; ③ Companies in the domestic large chip sector with accelerated self-control demand for GPUs and CPUs include Loongson Technology, Haiguang Information, and Cambricon; ③ Companies with mature process capacity such as Huahong and SMIC.===============Feedback from the front line of the industry:TI’s previous interpretation for customers was based on packaging recognition, and imports from Malaysia were unaffected, which was discussed over the weekend.Currently, many US chip companies have paused new order quotes while waiting for the finalized tariff details. However, they are still shipping to major customers as if no tariffs have been applied.Meanwhile, agents and distributors have started to raise prices, and traders in Huaqiangbei are profiting significantly.From the customers’ perspective, especially vehicle manufacturers, there is a strong aversion to uncertainty. Today, a vehicle manufacturer procurement team mentioned they are seriously considering increasing the use of domestic alternatives.If the recognition rules change in the future to determine tariffs based on the location of the wafer fab, it would be a significant benefit for analog, RF, and CPU sectors.==============We believe that the implementation of tariffs will temporarily lead many US chip manufacturers to adopt a wait-and-see approach, with several companies potentially pausing quotes, resulting in short-term supply shortages. In the long term, tariffs will significantly reduce the competitiveness of US IDM manufacturers in the Chinese market. Therefore, we believe that ① industry leaders are US IDMs; ② domestic demand is large; ③ the product gap between domestic and foreign products is relatively small; ④ the low domestic substitution rate in the analog/RF industry makes it a core beneficiary sector of tariff-induced domestic substitution.Analog: Price war pressure alleviates, accelerating recovery in 2025TI/ADI’s revenue from the China region in 2024 is approximately $4.6 billion, with a significant market share. The ongoing price war overseas has been a core pressure on the analog sector, especially in the automotive and industrial fields. The implementation of anti-dumping measures is expected to relieve competitive pressure on analog manufacturers, marking an important turning point in the competitive landscape of the analog sector in 2025.RF: Wafer & packaging predominantly located in the US, high certainty of tariff countermeasuresLeading RF front-end chip companies Skyworks and Qorvo have wafer and packaging capacities primarily in the US, making the certainty of tariff countermeasures high. We have identified three domestic RF front-end companies that generally possess the capabilities required for 5G mobile module L-PAMiF and L-PAMiD modules, especially the critical L-PAMiD module, which is expected to accelerate its introduction and volume production.Industry-related companiesAnalog: Siretta, Sanken Electric, Naxin Micro, Yachuang Electronics RF: Zhaosheng Micro, Weijie Chuangxin, Huizhi Micro==============IC design and storage module overall update: Domestic substitution continues to advance, and we remain optimistic about the sector’s certain growth#Analog Update: Tariff countermeasures significantly benefit the analog industryBased on 2024 estimates, TI and ADI’s revenue from mainland China is $5.1 billion, with automotive and industrial accounting for about 70%. The current domestic production rate of high-end analog chips is low, and tariff countermeasures are favorable for domestic substitution in the analog chip industry. Recommendations: #Sanken Electric, Naxin Micro, Siretta, Jiewa Technology.Performance Update: #Meixin Sheng disclosed its Q1 2025 performance forecast, with the company exceeding expectations in the first quarter, marking a turnaround. We expect total revenue in 2025 to be around 700 million yuan, with a year-on-year growth of over 70%.#SoC Update: AI edge trend remains unchanged, high performance certaintyBenefiting from demand driven by consumer subsidies, the SoC sector has shown strong performance in the first quarter. As of April 10, the disclosed performance forecasts of Tailin Micro, Juchip Technology, and Allwinner Technology have all exceeded market expectations. Additionally, SoC companies generally have no direct exports to US chips and have low exposure to the US, so the impact of tariffs is limited.Recommendations: #Hengxuan Technology, Ruixin Micro, Zhongke Lanxun, Juchip Technology, Allwinner Technology, Lexin Technology, and Amlogic.#Storage Update: Lanke Technology and GigaDevice’s Q1 reports both exceeded expectationsLanke Technology: The penetration rate of DDR5 continues to rise, with the shipment proportion of the second and third generation RCD increasing, coupled with a 155% year-on-year growth in high-performance capacity chips, leading to Lanke Technology’s Q1 performance exceeding expectations.GigaDevice: Benefiting from consumer subsidies and increased storage capacity in AI PCs, the company continues to grow its market share, with Q1 performance exceeding market expectations.We remain optimistic about the certainty of performance for Lanke Technology and GigaDevice under the trend of the AI industry. We are optimistic about the continued growth of Jiangbolong, Demingli, Xiangnong Xinchuan, and Baiwei Storage under the logic of domestic solid-state drive production and storage price increases.================The US-China tariffs have officially taken effect, and the expected domestic substitution is likely to gradually materialize into EPS, representing a certain direction for a double boost. We continue to focus on the precision instruments and semiconductor sectors for US substitution:[1] Precision Instruments: 1) Analytical instrument platforms: Juguang Technology, similar to North Huachuang’s industry position in the semiconductor equipment field; 2) Precision optical platform: Yongxin Optical. Optical microscopes, medical optical components and instruments, and semiconductor optical components are accelerating import substitution; 3) Core components and solutions for high-end medical imaging equipment: Yirui Technology’s CT tubes and OEM solutions are expected to replicate 5-10 more Yirui, mainly replacing the US; 4) Puyuan Precision: Benchmarking Keysight, accelerating the replacement of electronic measurement instruments, with three out of the top four global companies being US firms. Others: Wanyi Technology, Dingyang Technology, Kunheng Shunwei, and Youlide.[2] Semiconductors: 1) Analog IC: Sanken Electric, Naxin Micro, Siretta, Jiewa Technology; 2) FPGA: Fudan Microelectronics, Anlu Technology, Unisoc; 3) GPU: Cambricon, Haiguang Information, Jingjia Micro; 4) Semiconductor materials: Anji Technology, Dinglong Co.