China Exempts U.S. Outsourced Chips from Tariffs, Favoring TSMC-Made Products

U.S. chipmakers that outsource production overseas will be exempt from China's newly imposed retaliatory tariffs, according to a notice by the China Semiconductor Industry Association (CSIA). The clarification provides relief to companies such as Qualcomm (NASDAQ:QCOM) and AMD (NASDAQ:AMD), which rely on Taiwan-based TSMC for chip manufacturing.

The CSIA stated that the country of origin for import customs purposes is determined by the location of the wafer fabrication plant. As a result, chips produced by TSMC for U.S. firms will be classified as Taiwanese, avoiding the steep new tariffs China has imposed in response to the U.S. raising duties on Chinese imports to 145%.

Chinese customs will still impose tariffs of up to 125% on chips manufactured within the U.S. This affects companies such as Intel (NASDAQ:INTC), Texas Instruments (NASDAQ:TXN), Analog Devices (ADI), and ON Semiconductor (NASDAQ:ON), which operate domestic fabrication facilities. Despite packaging or assembly being done in China, chips originating from U.S.-based fabs will still be subject to higher duties.

Industry analysts, including He Hui of Omdia, emphasized that the CSIA’s guidance helps companies understand which imports will face penalties. The update triggered a rally in Chinese semiconductor stocks, as it could boost local manufacturing while encouraging global chipmakers to adopt a "China for China" strategy—producing chips within China to serve the domestic market.

The move underscores the growing complexity of global semiconductor supply chains and highlights how geopolitics continues to reshape trade policies in the tech sector.