After one tense climbing in the commercial war between China and the United Stateslast April China announced that it matched Washington imposing 125% tariffs to imports of American products, which of course includes semiconductors. Made the law, made the trap. China has the key to preventing their own tariffs from harming them.
The country of origin. It is the key point to prevent their own tariffs from harming them. On April 11, the Chinese Semiconductor Industry Association (CSIA) He published a notice in which the rules to determine the country of origin of semiconductor products were established. According to its norms, the country of origin is determined by the plant in which the wafer has been manufactured and not the country in which they have been designed or where the final packaging has been made. Thus they avoid known as effect Boomerang.
The effect Boomerang. It occurs when a tariff designed to punish another country, in this case the United States, ends up harming the economy of the country that imposes it. In response to tariffs imposed by Trump, China matched tariffs at 125%. Although this measure can harm US companies who want to sell their products in China, in the semiconductor sector it is especially delicate since the American chip dependence harms many Chinese companies.
Changing the “passport”. This is how some companies manage to escape the Chinese tariff; When importing an AMD chip, an American company, it is not considered an American product but Taiwanés, because it has been manufactured in Taiwan. It is not usual. In fact, for some market analysts It was a surprise Since the country of origin is usually associated with where the product is packaged, not where the factory is located.
Why is it important. China is demonstrating that the origin of a product or its “nationality” is not something written in stone, but is something much more fluid and is open to interpretations. This not only affects chips, applies to the entire world supply chain. In July the White House issued a Executive order which established a penalty of 40% for products whose origin has been modified (transsshipping) to avoid tariffs. With this order, the United States is taking measures for the products that arrive, but not for those who come out, although it is very likely that they adapt the legislation in the future.
A calculated movement. The movement reminds of the Dropshippingin the sense that the mark of the physical origin is separated from the product, although the objective is different. According to Michael Schulmanresponsible for investments in Running Point Capital, it is “a calculated movement to maintain economic stability and promote foreign investment in local manufacturing.”
The affected companies. AMD, Qualcomm or Nvidia outsourcing the manufacture of some of their chips to the TSMC plant in Taiwanso they can dodge the tariff that China imposed as retaliation. On the other hand, others such as Texas Instruments or Intel cannot dodge it because they have their Factories in the United States.
Image | Gary Lerude, Stas Knop
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