US chipmakers outsourcing manufacturing will escape China's tariffs

US chipmakers which outsource manufacturing will be exempt from China's retaliatory tariffs on US imports, according to a notice by the main Chinese semiconductor association on Friday.

Given the highly specialised and multi-country nature of chip supply chains, there was uncertainty within the industry about how tariffs would be applied to chip imports.

"For all integrated circuits, whether packaged or unpackaged, the declared country of origin for import customs purchases is the location of the wafer fabrication plant," the state-backed China Semiconductor Industry Association (CSIA), which represents the country's largest chip companies, said in an "urgent notice" on its WeChat account.


For US chip designers such as Qualcomm and AMD that outsource manufacturing to Taiwanese chipmaking giant TSMC, Chinese customs authorities will classify these chips' place of origin as Taiwan, according to EETop, an information platform and forum for Chinese chipmakers.

This means China-based companies importing their chips will not be forced to pay China's retaliatory tariffs on US imports, EETop said on its WeChat account.

"In contrast, chips made by...Intel, Texas Instruments, ADI, and ON Semiconductor - which operate their own US-based fabs - may be classified as US origin and be liable for tariff rates of 84% or higher," it added.

Beijing on Friday increased its tariffs on US imports to 125%, hitting back against US President Donald Trump's decision to hike duties on Chinese goods to 145%. EETop's analysis was published on Friday before Beijing's latest tariff hike.

After CSIA's clarification, the prospect of high tariffs on U.S.-origin chips led to a surge in Chinese chipmakers' shares on Friday.

"The notice from CSIA helps distinguish which US chips will be hit with tariffs," said He Hui, semiconductor research director at tech research company Omdia, "It is clear that some chips made in the U.S. will still be taxed even if they are packaged in China."

He added that this could benefit China's domestic chipmaking and its supply chains as foreign semiconductor firms pursue a "China for China" strategy - manufacturing for the Chinese market in China.