Customs Standards Update: U.S. Imported Chips Based on Wafer Fab Standards, with a Focus on Analog Chips
On the morning of April 11, the China Semiconductor Industry Association issued a statement, stating that according to the relevant regulations of the General Administration of Customs, the origin of “integrated circuits” is determined based on the four-digit tariff code change principle, meaning the wafer fab is recognized as the place of origin.
Currently, the domestic wafer fabs in the U.S. include: GlobalFoundries, Intel, Micron, and TI, among which, except for Intel, TI’s production capacity is mainly concentrated in the U.S. In 2024, TI’s revenue in China is expected to be around $3 billion. The global market size for analog chips exceeds $80 billion, with the Chinese market exceeding 300 billion yuan. At the same time, most analog chips use mature process capacities, providing significant replacement opportunities for domestic analog manufacturers.
Among the North American semiconductor giants, many in the large chip and mature process product fields possess domestic IDM capabilities. For example, TI’s wafer fabs are mainly located in Texas, Maine, and Utah, with a few fabs in Germany, and packaging and testing mainly in the U.S., with some in Malaysia, the Philippines, and Chengdu, China. Statistics show that most of Intel’s CPU and GPU products, some of AMD’s embedded processors, the vast majority of TI and ADI’s analog chip products, some of Broadcom’s RF and automotive electronic chips, a small portion of Micron’s DRAM and NAND chips, most of ON Semiconductor’s power products, and Qorvo’s RF front-end products are all potentially subject to additional tariffs from China.
Under the new tariff policy, the prices of U.S. products may rise in the future, increasing cost pressures for domestic customers using U.S. products. Considering the improved cost-performance ratio of domestic chips and the potential price increase space for corresponding domestic products, U.S. local analog/RF/CPU/power/storage products with a complete industrial chain may be affected, providing opportunities for corresponding domestic companies to gain market share.
According to data from Chinese customs, mainland China has a high dependence on imports of U.S. equipment for PVD, thermal treatment/oxidation diffusion, ion implantation, and measurement. In 2024, U.S. equipment accounted for 14% of PVD, 28.3% of thermal treatment/oxidation diffusion, 78.8% of ion implantation, and 37.3% of optical inspection in mainland China’s imported equipment. Additionally, mainland China also has a certain dependence on U.S. CVD/ALD and etching equipment. Considering the potential increase in tariffs in the semiconductor field in the future, the cost of importing U.S. equipment for mainland China fabs will increase, which is expected to further boost the procurement of domestic equipment. At the same time, since the U.S. export controls, the revenue share of leading U.S. semiconductor equipment companies in mainland China is expected to drop from over 40% in 2024 to around 20-30%, bringing new opportunities for domestic substitution in semiconductor equipment.
How are chip import tariffs determined? Let’s update the industry situation.
Regarding the determination of chip import tariffs, there has been a lot of discussion tonight. As a former TI employee, I also discussed this for a long time in my old colleagues’ group. Here’s a brief collection of frontline feedback from the industry.
TI’s interpretation for customers is that it is determined based on packaging and testing, and imports from Malaysia are not affected. This weekend, everyone should have discussed this.
What is the current situation?
Currently, many U.S. 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 already started raising prices, and traders in Huaqiangbei are making a fortune.
From the customers’ perspective, especially the vehicle manufacturers, there is a strong aversion to uncertainty. Today, I spoke with a vehicle manufacturer’s procurement team, and they are seriously considering increasing the use of domestic alternatives.
How did tonight’s rule change come about?
The screenshot of the tariff determination change originated from an article published yesterday by a supply chain management company called Sunron.
If their viewpoint is followed, the future change in determination rules based on the location of the wafer fab would be a significant benefit for analog + RF + CPU.
TI’s U.S. fabs account for 80%, accelerating opportunities for domestic analog IC substitution: Naxin Micro, Sireen, Shengbang, Jiewate, Aiwei Electronics, etc.
Wafer fab rules benefit Chinese fabs in gaining international customers: SMIC, Hua Hong, China Resources Micro, and Chipone.
Onsemi substitution opportunities accelerate: Weir Shares, Sitiwei;
U.S. CPU/GPU domestic substitution: Cambricon, etc.;
China’s countermeasures will continue to escalate in 2025:
On April 4, China imposed an additional 34% tariff on all imported goods originating from the U.S. based on the current applicable tariff rates. At that time, there was a disagreement on the classification of origin (whether to determine based on the packaging and testing stage).
On April 11, the China Semiconductor Industry Association released the rules for determining the “place of origin” for semiconductor products:
1) According to the General Administration of Customs, the origin of “integrated circuits” is determined based on the four-digit tariff code change principle, meaning the wafer fab is recognized as the place of origin.
2) It is recommended that the origin of “integrated circuits,” whether packaged or unpackaged, be declared based on the location of the “wafer fab” during import customs declaration.
Several supplementary examples regarding semiconductor taxation:
If manufacturing and packaging are in the same region, it is not necessary to consider others, and it is uniformly based on one region. For example, if a fabless company in the U.S. manufactures and packages the entire process in Taiwan, it is based on Taiwan; if in Korea, it is based on Korea;
If separated, there are two situations: U.S. wafer manufacturing and packaging in another region, it is based on U.S. origin; in other regions, production in region 1 and packaging in region 2, the origin is region 1.
Both situations must also consider the value of manufacturing and packaging stages; it will also involve the 30% value being the key process and special agreements on tariffs between mainland China and certain countries in the customs union.
There is also a special case where if they produce wafers in mainland China and then send them to a third-party region for packaging, it is considered made in China, regardless of value.
Additionally, there has not yet been actual execution of taxation for cases where both manufacturing and packaging are less than 30% value, but it cannot be ruled out that it will be used as a backup in the future.
In summary, this is just the beginning. The association’s announcement has provided relatively clear opinions, but practice will always be ahead.
This is for reference only.