On April 11, the China Semiconductor Industry Association issued a document to its member units, emphasizing the customs declaration principles regarding the origin of imported chips.
According to relevant regulations from the General Administration of Customs, the origin of "integrated circuits" is determined based on the four-digit tariff code change principle, meaning the location of the wafer fab is recognized as the origin. In this regard, the China Semiconductor Industry Association suggested that, whether packaged or unpackaged, the origin of "integrated circuits" for import declaration should be reported based on the location of the "wafer fab."
The Science and Technology Innovation Board Daily noted that after the release of this document, the market offered various interpretations, some of which were misinterpretations.
Shengxin Yang, a senior analyst in the semiconductor division of Sigmaintell, told the Science and Technology Innovation Board Daily that the "four-digit tariff code change principle," also known as the "Change in Tariff Classification (CTC) method," refers to determining the origin by identifying at which step the product's tariff code changes to the type declared (e.g., from bare silicon wafers to unpackaged chips during the wafer fab stage). In fact, China's customs standards for determining the origin of chips have not changed.
An anonymous source from the China Semiconductor Industry Association told the Science and Technology Innovation Board Daily that the rules on the "origin" of semiconductor products released on its official platform on April 11 were not a new policy recently issued.
The source stated that China, as a long-term importer of integrated circuits, has adhered to zero tariffs, contributing significantly to the sustainable development and innovation of the global semiconductor industry. However, with the unilateral disruption of the global trade system, this post aimed to help the industry unify its understanding and conduct business in compliance with regulations that the Chinese government had already clarified.
According to Article 3 of the "Regulations of the People's Republic of China on the Origin of Import and Export Goods," goods wholly obtained in one country (region) are considered to originate from that country (region); for goods produced in two or more countries (regions), the origin is the country (region) where the last substantial transformation occurred.
Article 6 of the regulations mentions that the criteria for determining substantial transformation as stipulated in Article 3 are based on the change in tariff classification; if the change in tariff classification cannot reflect substantial transformation, supplementary criteria such as ad valorem percentage, manufacturing, or processing procedures are used. Specific standards are formulated by the General Administration of Customs in conjunction with the Ministry of Commerce.
However, some industry insiders pointed out that although the standards have existed for some time, in practice, China's past determination of the origin of imported chips was relatively arbitrary, with companies declaring based on design, wafer fab, or packaging and testing. For example, many overseas manufacturers chose to set up packaging and testing capacity in Southeast Asia. After clarifying that the wafer fab location is the origin, these manufacturers may no longer be able to determine the origin through packaging and testing processes.
With the industry's renewed clarification of the origin determination standards for imported chips under unconventional trade tariff policies, the A-share market reacted swiftly.
On April 11, the semiconductor sector surged, with 16 stocks on the Science and Technology Innovation Board rising by more than 15%. Among them, VeriSilicon, Jinghua Micro, Naxin Micro, SiRuipu, and Meixin Semiconductor hit the limit-up, while Huahong Company rose by over 19%, and Jiehua, Jingfeng Micro, Longxun, and Huafon Test rose by over 14%.
A source from a domestic wafer fab told the Science and Technology Innovation Board Daily, "With the introduction of this international tariff policy, it is expected that domestic analog chips will benefit the most, followed by wafer foundries like Huahong Semiconductor with rich analog platforms."
Regarding the reasons, a leader of a domestic specialized analog chip company told the Science and Technology Innovation Board Daily that for high-end analog chips, chip design often needs to be highly integrated with manufacturing processes. Therefore, taking overseas giants like Texas Instruments as an example, the manufacturing process is usually supplied by their own or local US wafer production lines, making it difficult to transfer manufacturing capacity abroad in the short term. It is expected that the supply and demand of related products will be significantly affected, and the demand for domestic solutions will increase.
Shengxin Yang from Sigmaintell further added that from the perspective of the industry chain structure, for manufacturers whose wafer fabs are in the US and whose chips are sold to mainland Chinese customers, besides Texas Instruments, companies like Intel, ON Semiconductor, and Micron are expected to be more affected by the tariff policy. If only considering tariff issues to deploy capacity in mainland China, it is not ideal from the perspectives of cost, construction cycle, and policy risk. The risk of companies relocating their industry chains due to short-term policy fluctuations is too high, and the possibility of implementation is very low.
A source from an analog chip manufacturer stated that although in the short term, due to the intense changes in the market environment, the business side is still observing downstream reactions and it is difficult to easily conclude changes in demand, in the long run, the acceleration of domestic self-control should be a major trend and opportunity for the development of domestic chip companies.
A source from a mainland Chinese wafer fab stated that for customers in North America and other overseas markets, they have been making efforts to win them over, and with the emergence of market opportunities, they are more motivated to do business with these customers. Regarding policy risks, the industry will focus on developing more customers, accelerating product development, and steadily increasing capacity. In addition, from the actions of downstream customers, there has been no emergency restocking or price reduction, "Everyone is waiting and watching, and perhaps it won't be long before we see some signs."
