China Won’t Tax American Chips Made Overseas; U.S. Factories Hit With High Tariffs
China has stated that it will not impose tariffs on American-designed chips that are manufactured overseas. This would not only allow companies like AMD and Qualcomm to avoid the “punitive” taxes but could also prove to be beneficial for chipmakers like TSMC.
China’s New Chip Tax Could Punish U.S-Based Semiconductor Firms Like Intel, Texas Instruments & GlobalFoundries
With the nature of the semiconductor supply chain globally, specifically with most manufacturing concentrated in countries outside of the U.S. and China, both countries had initially avoided taxing the segment. This benefits companies that rely on outsourcing manufacturing, unlike Intel and Texas Instruments, which have fabs in the U.S.
In China, if a company wants to import chips, the taxation would take into account the country of origin, which is determined by the location of the wafer manufacturing plant. For TSMC, their chips would be considered Taiwanese. But, its competitor, Samsung Foundry will have chips from its U.S’ Taylor and Texas plants eligible to be taxed.
Samsung’s South Korean lines (e.g., Hwaseong, Giheung) will also be tariff-free in China. Not only this, but its NAND flash chips manufactured in Xi’an, China will be eligible for local incentives.
After China announced this exemption, shares of companies that outsource chip production to TSMC, like AMD and NVIDIA, climbed, while Intel’s stock dropped over 6%. Other U.S.-based chipmakers that manufacture in America, including Texas Instruments, ADI, and Onsemi, also saw their shares fall.
For China, this new policy seems to have affected U.S.-based fabs, only. These new rules could help encourage foreign chipmakers to shift more manufacturing to China to avoid tariffs. The goal ultimately, is to boost China’s chip industry, especially in legacy chips, or “mature-node semiconductors.”
This is all we know for now, but rest assured that we will keep you updated as new information becomes available.
