What Is The Impact Of Semiconductors Under The Tariff Confrontation?

On April 2, 2025, in response to the U.S. government's announcement to impose "reciprocal tariffs" on Chinese goods exported to the United States, China issued countermeasures. The Customs Tariff Commission of the State Council issued a document stating that all imported goods originating in the United States will be subject to an additional 34% tariff on top of the current applicable tariff rate. Specifically, on April 2, 2025, the U.S. government announced that it would impose "reciprocal tariffs" on Chinese goods exported to the United States. The US move is not in line with international trade rules, seriously undermines China's legitimate and lawful rights and interests, and is a typical unilateral bullying practice. In accordance with the Customs Law of the People's Republic of China, the Customs Law of the People's Republic of China, the Foreign Trade Law of the People's Republic of China and other laws and regulations and the basic principles of international law, with the approval of the State Council, from 12:01 on April 10, 2025, additional tariffs will be imposed on imported goods originating in the United States. The relevant matters are as follows: 1. All imported goods originating in the United States shall be subject to an additional tariff rate of 34% on top of the current applicable tariff rate. 2. The current bonded and tax reduction and exemption policies remain unchanged, and the additional tariffs imposed this time will not be reduced or reduced. 3. Before 12:01 on April 10, 2025, if the goods have been shipped from the place of departure and imported from 12:01 on April 10, 2025 to 24:00 on May 13, 2025, the additional tariffs stipulated in this announcement will not be levied.

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In addition, the Ministry of Commerce and the General Administration of Customs have launched a six-pronged campaign, including putting 16 U.S. entities on the export control list, imposing export controls on medium and heavy rare earth-related items, suspending the qualifications of 6 U.S. companies to export their products to China, putting 11 U.S. companies on the list of unreliable entities, initiating an industrial competitiveness investigation on imported medical CT tubes, and suing the United States for "reciprocal tariffs" at the WTO. This countermeasure is aimed at the "reciprocal tariff" policy announced by the United States on April 2 against China, marking the first time in six years that the Sino-US trade friction has become white-hot. It is worth noting that the tariffs cover an unprecedented range of goods from soybeans and automobiles to chips and medical devices, and there are no exemptions for all goods originating in the United States. However, the policy also sets a buffer period: goods that depart before April 10 and arrive before May 13 still enjoy the original tax rate, which leaves a window for enterprises to adjust their supply chains. In the market, the three major U.S. stock futures fell, Dow futures fell more than 1,500 points, Nasdaq 100 futures fell more than 4%, and S&P 500 futures fell 3%. The 2x long panic index rose more than 30% and rose nearly 50% yesterday.

U.S. big tech stocks fell sharply in pre-market trading. Amazon fell more than 6%, Tesla fell more than 5%, Apple fell 4.72%, Meta fell more than 4%, Nvidia fell 3.88%, Microsoft fell 3.85%, and Google fell more than 3%.

01 What goods does China import from the United States? Statistics released by the General Administration of Customs of China on January 13 showed that for the whole of 2024, the trade volume between China and the United States will be 688.28 billion US dollars, a year-on-year increase of 3.7%. According to statistics, for the whole year of 2024, the trade volume between China and the United States will be 688.28 billion US dollars, a year-on-year increase of 3.7%. Among them, China's exports to the United States were 524.656 billion US dollars, an increase of 4.9%. According to the commodity category, mechanical and electronic products, agricultural and sideline food, energy products, chemicals and chemicals, transportation equipment products, precision instruments, plastics/rubber and products, metals and products, wood/wood pulp, and metal minerals (mainly copper) are the top ten categories of China's imports from the United States, accounting for 23.17%, 16.33%, 14.12%, 12.62%, 9.33%, 7.82%, 5.34%, 4.35%, 1.71%, and 1.17% respectively. The top five import commodity categories are further subdivided: in the mechanical and electronic products, integrated circuits, engines and parts, semiconductor manufacturing equipment and parts, valves/bearings, communications/audio-visual equipment and parts, the import value accounted for 7.21%, 4.57%, 2.74%, 1.26%, and 0.90% respectively; In the agricultural and sideline food category, the import value of genetically modified yellow soybean, meat, cotton, sorghum, fruits/nuts, feed, aquatic products, wheat and corn accounted for 7.36%, 1.86%, 1.13%, 1.06%, 0.79%, 0.79%, 0.67%, 0.37% and 0.34% respectively. Among the energy products, the import value of liquefied propane/butane, crude oil, liquefied natural gas, coal and petroleum coke accounted for 7.11%, 3.68%, 1.48%, 1.21% and 0.35% respectively; Among the chemicals and chemicals, organic/inorganic chemicals, chemicals (mainly serum/vaccines), cosmetics/toiletries, and backing reagents accounted for 3.84%, 3.44%, 1.22%, and 1.06% of the import value, respectively. Among the transportation equipment products, off-road vehicles/cars/passenger cars, and airplanes (with no load greater than or equal to 15 tons) accounted for 4.44% and 3.18% respectively. On the whole, agricultural products, energy, machinery and electronics are the three core import areas. Due to the Sino-US trade friction and China's diversified procurement strategy, the share of U.S. soybeans, corn and other agricultural products in the Chinese market will decline in 2024. However, high-tech products such as semiconductors and electronic equipment accounted for the highest proportion of imports, reflecting China's dependence on high-end manufacturing in the United States.

02 What is the impact on Chinese semiconductors? First, it is more difficult to obtain equipment and technology. The increase in tariffs will have a great impact on the semiconductor equipment industry. U.S. companies such as Applied Materials and Lam Research account for about 40% of the global semiconductor equipment market. After the tariffs are imposed, the import cost of key equipment such as lithography machines and etching machines may increase by more than 50%. This will make SMIC, Huahong and other companies accelerate the shift to domestic equipment. With the continuous maturity of domestic equipment manufacturers' technology and services, the proportion of equipment localization has increased year by year, and the localization rate will grow faster after this campaign. Secondly, the cost of imports has increased. The price advantage of U.S. products such as Nvidia H20 chips and TI analog chips has weakened. The increase in tariffs will directly push up the procurement costs of domestic enterprises, and enterprises that rely on imports may face profit compression. Tariffs on Micron HBM3, Samsung DDR5 memory and other products have been raised, and domestic server manufacturers may increase the purchase of domestic storage. Third, supply chain restructuring and changes in international cooperation. China has accelerated cooperation with non-US suppliers to reduce its dependence on US technology. For example, some companies have built factories overseas (such as Southeast Asia and Europe) to avoid tariffs, or signed long-term agreements with European automakers to reduce their dependence on the U.S. market. However, it should be noted that in Trump's reciprocal tariff list, Southeast Asia has undoubtedly become the hardest hit area. Vietnam will be subject to a reciprocal tariff of 46%, which is one of the highest rates on the list of tariffs such as Trump. Bespoke, a research institute, even complained that if a company had previously moved production from China to Vietnam, congratulations – your equivalent tariff rate is now 46%. Among them, the fruit chain enterprises are undoubtedly the most "injured". Goertek has been investing in Vietnam for many years. Since 2012, Goertek has established Goertek Electronics (Vietnam) Co., Ltd. with a registered capital of 4 million US dollars, and in 2019, Goertek Technology (Vietnam) Co., Ltd. was established, mainly producing AirPods, smart phones, drones and other products. Similarly, in 2016, Luxshare Precision invested in the establishment of a Vietnamese subsidiary, Luxshare Precision (Vietnam) Co., Ltd., in Bac Giang Province, Vietnam, and since then, Luxshare Precision (Yunzhong) Co., Ltd. and Luxshare Precision (Nghe An) Co., Ltd. have been set up in Bac Giang Province, Nghe An Province and other places in Vietnam and built production bases. It is reported that Lixun Precision mainly produces AirPods, iWatch, TWS and other products for Apple in Vietnam. Lens Technology also established Lens Technology (Vietnam) Co., Ltd. in Vietnam. According to the financial report, the amount of Lens Technology's construction projects at the end of 2024 will be 1.32 billion yuan, mainly because Lens Second Park in Vietnam is still under construction. As a result, some companies have shifted production from China to Vietnam, but with the United States imposing a 46% tariff on Vietnam, it seems that the choice of production location has added another tariff index consideration. Overall, U.S. tariffs and China's countermeasures will exacerbate the supply chain pain of the semiconductor industry in the short term, but in the long run, this policy will accelerate the localization process and promote technological autonomy and industrial upgrading. Industry differentiation will be further intensified, and enterprises with technical barriers and diversified production capacity layout will stand out.

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03 Event review: The United States announced "reciprocal tariffs" On Wednesday (April 2), U.S. President Trump signed two executive orders on the so-called "reciprocal tariffs" at the White House, announcing that the United States would set a "minimum benchmark tariff" of 10% for all trading partners and impose higher tariffs on multiple trading partners. Mr. Trump said the United States would impose reciprocal tariffs on dozens of trading partners, though the tariffs would not be exactly reciprocal, and that the United States would charge these countries and regions about half of the combined tax rate. This series of operations can be described as widely targeted and clearly priced. Among them, 34% are in China, 20% in the European Union, 10% in the United Kingdom, Brazil, Australia, Singapore, etc., 36% in Thailand, 49% in Cambodia, 32% in Indonesia, 26% in India, 25% in South Korea, and 24% in Japan...... In addition, the policy imposes reciprocal tariffs ranging from 1% to 49% on specific trading partners. A key provision of the policy, which allows for tariff reductions where at least 20% of the product's value comes from U.S.-made components, could have a significant impact on industries that rely on semiconductor imports. According to a White House press release, ad valorem rates apply only to non-U.S. ingredients in imported products, provided the ingredient meets the 20% U.S. origin threshold. "U.S. Ingredients" refers to components that are fully produced domestically or mass-processed. To enforce the rule, U.S. Customs and Border Protection (CBP) has the authority to collect documentation and verify the percentage of U.S. content in imported goods. The measure aims to ensure fair application of tariffs while encouraging domestic production.

04 U.S. media: Reciprocal tariff impact, the chip industry is "in calamity" Previously, some U.S. media reported that although Trump excluded semiconductors from his reciprocal tariffs. But given that most chips are imported indirectly to the United States, rising prices for numerous products containing chips could hit chip demand. At first glance, Trump's failure to include semiconductors in his reciprocal tariffs may sound good, but in reality, it does not bring much relief to the semiconductor industry. After all, semiconductors are widely found in the ever-expanding list of consumer goods. Even such exemptions may not be sustainable. The Trump administration is preparing to impose separate tariffs on industries such as semiconductors, pharmaceuticals and, possibly, critical minerals. Apparently, Trump expects tariffs on chips "soon." President Trump said at a White House briefing: "The chip [tariffs] will begin to be implemented soon, and the pharmaceutical industry will also begin to impose tariffs in the near future." "At least for the time being, chips directly imported by the United States can be tariff-free, and the total amount of chip imports last year was about 82 billion US dollars. However, most of the chips are imported indirectly. Chips are typically manufactured overseas, packaged and then packed into electronics shipped around the world, including to the United States, where tariffs of up to 49 percent are due. Even many U.S.-made chips are sent to Taiwan, Chinese mainland or Southeast Asia for final assembly and then exported to end customers. This indirectness makes it tricky to assess the impact on the semiconductor industry. But one thing is certain: the impact is bound to be enormous. Semiconductors make up a large portion of a wide range of electronics, so many electronics manufacturers have a relatively easy time reaching the 20% U.S. content threshold. For example, semiconductor components typically account for 25-40% of consumer electronics such as smartphones, laptops, and tablets, and 35-50% of high-performance gaming devices such as gaming laptops and consoles. In the automotive sector, the semiconductor content is 20-30%, and the proportion of electric vehicles is even higher due to advanced power semiconductors such as silicon carbide (SiC) and gallium nitride (GaN). For data centers and AI infrastructure, the semiconductor content is even more impressive. 50-70% of the cost of servers and data center equipment is for semiconductors, including processors, memory, and networking chips. Industrial application equipment and network equipment, including 5G base stations and Wi-Fi routers, also contain semiconductor components ranging from 15-60%. Last year, the United States imported about $521 billion in machinery, $478 billion in electronics and $386 billion in automobiles, according to an analysis by Bernstein Research. These products usually contain a large number of chips, and if people buy less because of rising prices, chip sales will inevitably decline. Ultimately, this will reduce the revenue and growth rate of chipmakers, which in turn could have a shock to profits and stock market valuations. Bernstein analyst Stacey Raskin noted in a note: "Overall, we don't see much positive effect on the semiconductor sector. "It's really hard to find the good stuff. The tariffs have not given chipmakers an additional incentive to expand production in the United States. In any case, their products are generally exported to Asian supply chains before returning to the United States in the form of goods subject to tariffs. Companies like Texas Instruments and Analog Devices, which have a large presence in the United States, do not gain more advantages than their foreign counterparts, after all, foreign competitors are also exempt from semiconductor tariffs. Chris Cassel, an analyst at Wolf Research, noted in a note that the entire supply chain could see a wave of order cancellations as chipmakers and their customers expect consumer demand to be weaker due to higher prices, similar to the 2020 COVID lockdowns. He also mentioned that consumer electronics could be hit the hardest, and that tariffs would also raise the cost of Nvidia's sought-after AI servers, which could call into question the industry's second-quarter profit expectations. "We don't feel like there's any way to avoid these effects," Cassel said. Nvidia's stock price fell more than 6% on Thursday. Chip companies have not yet issued a profit warning, which indicates that the extent of the impact is unclear. To reduce the impact, the chip industry may try to negotiate with the Trump administration to lower the tariffs that have the greatest impact, or to exempt more electronics and other goods that contain chips. Ideally, the Trump administration would respond positively by removing many of the most damaging tariffs. However, given Trump's consistent preference for a tough stance rather than compromise, the more likely scenario is – more tariffs.