How China's New Chip Origin Rule Redraws the Global Semiconductor Map

In April 2025, a regulatory shift quietly issued by China’s Semiconductor Industry Association sent tremors through the global semiconductor supply chain. The rule redefines the country of origin for imported chips not by where they are packaged, but by where they are fabricated — the wafer stage. While seemingly technical, this move dramatically reshapes how tariffs apply to semiconductors, and serves as a strategic lever in Beijing’s increasingly complex game of economic statecraft.

Winners and Losers: Fabless vs. Fabbing Firms

At the heart of the policy is a calculated distinction. U.S.-based chip giants that design semiconductors but outsource fabrication to foundries in Taiwan or Korea (like Qualcomm, AMD, and Nvidia) are largely spared. Their chips, though American in brand and intellectual property, are classified as Taiwanese or Korean in origin, thus avoiding China's retaliatory tariffs of up to 125%.

But companies like Intel, Texas Instruments, and Analog Devices — which operate their own U.S. fabrication plants — are squarely in Beijing’s crosshairs. Even if their chips are packaged in Malaysia or the Philippines, they are now unequivocally tagged as "U.S.-origin" and face the full brunt of Chinese tariffs. These firms may be forced to slash prices, absorb margin hits, or surrender market share in China.

Global Repercussions: Rerouting the Chip Highway

Southeast Asian packaging hubs like Malaysia and Vietnam, long used to launder country-of-origin labels, find their strategic utility diminished. While they retain value as low-cost assembly centers, they can no longer shield U.S. chips from Chinese duties by relabeling them.

Instead, we may see a shift in fabrication demand toward countries whose chips remain tariff-exempt in China: Taiwan, South Korea, and even China itself. For U.S. firms, the message is clear: if you want to sell to China, don’t fab in America.

China's Endgame: Autonomy Through Pressure

The new rule is more than a tactical tariff maneuver; it is a pillar in China's broader push for semiconductor self-reliance. By penalizing imports based on fab origin, Beijing is channeling demand toward domestic fabs like SMIC and Hua Hong. The result: not just protectionism, but stimulation. Shares of Chinese chipmakers surged after the rule’s release, as local foundries prepared for an uptick in orders.

It also incentivizes foreign firms to manufacture within China. "Make it in China, for China" becomes not just an invitation, but a necessity.

A Strategic Realignment

This is a moment of divergence. While the U.S. is pouring billions into onshore fabs via the CHIPS Act, China is making U.S. manufacturing a liability in its own market. Tariffs now follow the silicon trail back to its fab. This creates an unprecedented dynamic: the geopolitical weight of a chip is now measured in microns.