China Revises Semiconductor Origin Regulations, US Temporarily Exempts Electronic Products from Tariffs: Taiwanese and American Tech Companies Experience Different Effects

In April 2025, the China Semiconductor Industry Association announced that the origin of imported integrated circuit products would be determined based on the location of wafer manufacturing, affecting major U.S. chip manufacturers like Intel. The U.S. Trump administration temporarily exempted products like smartphones and computers from reciprocal tariffs, offering short-term relief to Taiwanese companies such as TSMC. These policies have a significant impact on the Taiwanese semiconductor supply chain and American tech companies.

China Adjusts Origin Rules: Based on Wafer Manufacturing Location

On April 11, 2025, the China Semiconductor Industry Association (CSIA) issued an urgent notice recommending that all imported integrated circuit products declare the location of the wafer manufacturing location as the place of origin during customs clearance. This rule applies to both packaged and unpackaged chips and is determined based on the "substantial transformation" principle outlined in China's General Administration of Customs Order No. 122.

The term "tape-out," also known as "tape-out," refers to the stage where a chip design is sent to a wafer foundry for manufacturing after the design is completed. According to the new regulation, if a chip is designed in the United States but manufactured in Taiwan, the product will be recognized as "Made in Taiwan" when declared in China, rather than being considered of U.S. origin.

This policy directly impacts companies with wafer manufacturing facilities in the U.S., such as Intel, Texas Instruments (TI), and Analog Devices (ADI). These companies used to manufacture wafers in the U.S. and then send them to Asia for packaging, now face punitive tariffs of up to 125% in China.

Taiwanese Wafer Foundries Benefit from Order Transfer Phenomenon

Liu Peizhen, Director of the Industrial Economics Database at the Taiwan Institute of Economic Research, pointed out that this policy might prompt U.S. companies to outsource wafer manufacturing to Taiwanese firms, such as TSMC and UMC, to avoid high Chinese tariffs. Taiwanese wafer foundries like TSMC and UMC, which are already major partners of U.S. IC design companies such as NVIDIA and AMD, are relatively less affected as they have long outsourced manufacturing to Taiwan.

However, for companies still conducting wafer manufacturing in the U.S., failing to adjust their supply chains will subject them to tariff pressures in the Chinese market. According to reports, Intel and Texas Instruments have significant sales in the Chinese market, and this policy may force them to reassess their manufacturing strategies.

U.S. Temporarily Exempts Tariffs on Smartphones and Computers

Meanwhile, on the evening of April 11, the U.S. Customs and Border Protection (CBP) announced a temporary exemption from the planned retaliatory tariffs on products such as smartphones, laptops, hard drives, computer processors, memory chips, and semiconductor manufacturing equipment. These products were initially subject to a 125% tariff imposed by the Trump administration on Chinese goods and a 10% basic tariff on goods from other countries.

According to the announcement, if the "U.S. content" makes up more than 20% of the total declared value of imported goods, no additional tariffs will be imposed on that portion. This policy provides relief for U.S. brands like Apple, Dell, and HP, which rely on Chinese manufacturing, and allows suppliers like TSMC to maintain stable shipments to the U.S.

Additionally, semiconductor manufacturing equipment is included in the exemption list, which is significant for TSMC's U.S. operations. TSMC is currently making large-scale investments in Arizona, and this exemption helps control the cost of equipment imports.

Taiwanese Companies Receive Urgent Orders in the Short Term

Due to the U.S. tariff suspension measures, Taiwanese electronics and semiconductor companies have recently experienced a surge in urgent orders. According to reports, some Taiwanese companies have received a large number of orders during the 90-day tariff window and are accelerating shipments. Freight operators have reported that air cargo space is fully booked, reflecting the industry's rapid response to policy changes.

However, some industry insiders question whether the typical semiconductor production lead time, which usually exceeds 90 days, can accommodate such a large volume of shipments in the short term.

U.S.-China Policy Interactions Affect Supply Chain Layout

Although not explicitly targeting each other, the policy adjustments by China and the U.S. have significantly impacted the global semiconductor supply chain. China, through its rules of origin, focuses tariff pressure on chips manufactured in the U.S., while the U.S., through exemption measures, temporarily reduces the import costs of consumer electronics.

For Taiwan, being a global hub for wafer foundries, companies like TSMC and UMC benefit from some order transfers and tariff exemptions in the short term amid the policies of the two major economies. However, the long-term stability of the supply chain will depend on future policy directions and the development of bilateral trade relations.

References

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