According to the “Emergency Notice on the Origin Certification Rules for Semiconductor Products” issued by the China Semiconductor Industry Association on April 11, 2025, the origin certification standards for integrated circuit products have been clearly adjusted to be based on the wafer fabrication location. The introduction of this rule directly affects the international trade compliance of the semiconductor industry chain. The following analysis will cover four aspects: policy content, implementation background, industry impact, and response suggestions.
1. Analysis of Core Policy Content
-
Reconstruction of Certification Standards The new regulations clearly adopt the four-digit tariff code change principle as the basis for origin determination, meaning that the origin of integrated circuit products is based on the location of the wafer fabrication plant, regardless of where the subsequent packaging and testing stages are completed. For example, if a chip design company (such as an American company) commissions TSMC (in Taiwan) for wafer fabrication, even if the final packaging is completed in Malaysia, the origin of that chip will still be recognized as Taiwan, China.
-
Customs Verification Requirements Companies must provide purchase order (PO) documentation when importing and declaring goods. Customs will verify the authenticity of the wafer fabrication location through traceability of production processes (such as oxidation, photolithography, etching, and other core processes). If the declared information does not match the wafer fabrication location, the goods may be detained or penalized.
-
Supplementary Determination Dimensions The General Administration of Customs Order No. 122 stipulates that if the tariff classification has not changed, supplementary determination can be made based on the value-added standard (the wafer fabrication stage must achieve a value increase of over 30%) or the core process proportion (such as key processes completed at the wafer fabrication location). For example, if a chip achieves less than 30% value increase during the wafer fabrication stage, but the core photolithography process is completed at the wafer fabrication location, it may still be recognized as originating from that location.
2. Background of Policy Introduction
-
Addressing International Trade Risks In recent years, some companies have evaded tariffs by “shifting the packaging location” (for example, declaring chips fabricated in the U.S. as non-U.S. origin after packaging in a third country). The new regulations aim to combat such practices and ensure that origin determination aligns with actual production processes.
-
Strengthening Local Industry Chain Competitiveness China is accelerating the localization of semiconductors, and the new regulations focus origin determination on the wafer manufacturing stage, benefiting local foundries such as SMIC and Huahong Semiconductor. For instance, SMIC’s expansion of 28nm and 14nm process capacity will directly enhance its share of origin in the international supply chain.
-
Aligning with International Rules The General Administration of Customs Order No. 122 aligns with the World Trade Organization’s “Agreement on Rules of Origin,” clarifying the standard for “substantial transformation” to reduce international trade disputes. For example, the EU recently launched a semiconductor import traceability program, and China’s new regulations can reduce the risk of companies being temporarily detained due to flaws in origin certification.
3. Industry Impact Analysis
-
Increased Compliance Costs in Supply Chains Multinational companies need to reorganize their global supply chains and establish wafer fabrication traceability records. For example, TSMC must provide detailed process records for each batch of fabricated products to comply with customs verification.
-
Devaluation of Packaging and Testing Stages The packaging and testing stages will no longer affect origin determination, which may lead some companies to adjust their investment strategies. For instance, packaging giants like ASE must strengthen collaboration with foundries to ensure consistency between packaging and wafer fabrication information.
-
Acceleration of Domestic Substitution Domestic foundries will benefit from the “origin advantage.” For example, if Yangtze Memory Technologies (YMTC) fabricates NAND flash memory domestically, its products may enjoy lower tariffs or policy support during import declaration.
-
Risks of International Trade Friction The U.S. has recently intensified export controls on semiconductor products to China (such as restricting equipment for processes below 14nm). China’s new regulations may provoke U.S. scrutiny over “origin evasion.” For instance, if SMIC uses U.S. equipment for wafer fabrication, its products will still be considered of Chinese origin, potentially facing stricter export reviews.
4. Recommendations for Enterprises
-
Comprehensive Supply Chain Management
- Establish a wafer fabrication – packaging – customs declaration information matching mechanism to ensure consistency in declarations.
- Sign agreements with foundries to clarify the responsibility for providing wafer fabrication proof documents.
Compliance Document Management
- Retain procurement orders (PO), process flow diagrams, equipment usage records, and other materials from the wafer fabrication stage for customs verification.
- For advanced process products below 14nm, apply for customs pre-classification rulings in advance.
Strategic Layout Adjustments
- Consider expanding domestic foundries or collaborating with local companies like SMIC to gain origin advantages.
- Evaluate the cost-effectiveness of packaging and testing stages, and appropriately reduce non-core packaging capacity.
Monitoring Policy Dynamics
- Pay attention to subsequent interpretations from the China Semiconductor Industry Association and the General Administration of Customs, such as transitional arrangements or exceptions.
- Participate in compliance training organized by industry associations to timely adjust internal management systems.
5. Interaction with International Rules
China’s new regulations are in a game with the U.S. “National Defense Authorization Act” (NDAA). For example, the U.S. prohibits government agencies from procuring products from companies like SMIC and YMTC, while China’s new regulations may mitigate the impact of such restrictions through “origin transfer.” Companies need to find a balance between U.S. and Chinese regulations, such as shifting key wafer fabrication stages to Southeast Asia or Europe to avoid dual controls.
In summary, this adjustment of origin rules is an important measure for China’s semiconductor industry to respond to global challenges. Companies need to actively respond from compliance, supply chain, and strategic perspectives to seize policy benefits and mitigate risks.
