Under the new regulations on the 'origin of chips,' is there a market for domestic alternatives?

Last Friday (April 11), A-shares and Hong Kong stocks of chip companies experienced a collective explosion.

Against the backdrop of the China-U.S. tariff war, the China Semiconductor Industry Association issued a notice that addressed the issue of "origin" certification for additional tariffs, confirming that the trial production of "Integrated Circuits" is recognized as the "origin." Once the news was released, it quickly spread in the semiconductor industry, triggering a strong rebound in chip stocks.

What does this new regulation actually mean? Which companies will be affected? What investment opportunities are worth paying attention to?

Basic knowledge enlightenment

Firstly, the birth of a chip goes through several processes: design → trial production → packaging → testing → mass production. The trial production phase refers to the process of converting the designed integrated circuit layout into an actual chip, which can be understood as trial production. If the trial production is successful, large-scale chip manufacturing can commence.

According to previous rules, the "origin" is generally identified as the country and region where the wafer manufacturing and packaging testing foundries are located.

Under the latest rules, the 'origin' has changed to the location of the tape-out factory.

In other words, China imposes a 125% tariff on chips manufactured in the U.S. regardless of where they were designed or packaged. Therefore, the new rules regarding the origin of chips that were published this time are equivalent to a precise strike against "Made in America."

What impact does it have on us?

Citi pointed out that the U.S. tariff policy combined with the rules on origin determination by the China Semiconductor Industry Association will suppress imports of American analog chips, creating an opportunity for domestic chip companies to fill the market gap.

For the United States, chip companies have different fates.

One situation is that companies that design and produce in the U.S., with a high percentage of domestic manufacturing but a high percentage of revenue from China, will face significant tariff impacts. For example $Intel(INTC.US)$ ， $Texas Instruments(TXN.US)$ ， $Micron Technology(MU.US)$ , most of the core manufacturing plants of these companies are in the United States, meaning the origin is the U.S., which will weaken their cost advantages due to high tariffs, and they may even face capacity adjustments.

Another situation is, like $NVIDIA(NVDA.US)$ 、 $Advanced Micro Devices(AMD.US)$ 、 $Qualcomm(QCOM.US)$ For chip design companies, their production mainly relies on Taiwan Semiconductor, Samsung, and other foundries (with few in the U.S.), so the impact is relatively small. Moreover, this situation can meet China's import demand while raising the cost of business return for the opposing companies. If factories are built back in the U.S., it means losing business in China. (PS: However, it is important to note that on April 14, $NVIDIA(NVDA.US)$ announced that it will produce GPUs in the U.S. for the first time, and investors can continue to monitor related developments.)

For China, using rules to break the deadlock has far-reaching effects.

By moving the determination of origin to the tape-out stage, as long as the tape-out is in China, chips can be packaged and tested anywhere and still be considered made in China. This directly undermines the U.S. logic that the packaging site determines the origin, providing a compliant new path for design companies like Huawei's HiSilicon and Cambrian.

At the same time, Chinese chip companies can take advantage of this opportunity to increase R&D investment, accelerate import substitution, and drive the overall development of the integrated circuits industry.

U.S. origin semiconductor companies.

To facilitate everyone's review, we have compiled a list of certain US-based chip companies, where you can pay attention to the Business trends of related companies.

For $Taiwan Semiconductor(TSM.US)$ such foundries, as well as companies like $英伟达 (NVDA.US)$ ， $美国超微公司 (AMD.US)$  ， $Qualcomm(QCOM.US)$ Companies that currently have relatively small impact; while other companies may face the risk of revenue decline and Industry adjustments due to increased tariffs, which need to be avoided.

Investment opportunities for domestic chip substitution.

For domestic chip companies, this is undoubtedly a great opportunity, and we can focus on the beneficiaries of this wave of domestic substitution and policies.

The focus can be on semiconductor manufacturing companies-- $SMIC(00981.HK)$ ， $HUA HONG SEMI(01347.HK)$ Benefiting from the return of orders and domestic demand, on April 11th, the stock price has rebounded significantly by 6% and 15%. Additionally, there are design/manufacturing companies, including $BATELAB(02149.HK)$ ， $SOLOMON SYSTECH(02878.HK)$ ， $HORIZONROBOT-W(09660.HK)$ ， $SHANGHAI FUDAN(01385.HK)$ And, due to the strengthening of logic, there may continue to be funding support.

Of course, there are many related Industry Chain companies in mainland China, which will not be elaborated here. You can click to open the Futubull APP - Hong Kong Stocks - Investment Theme - Chip Stocks to view the relevant companies.

Investors should have a strategy.

Short-term strategy: focus on policy catalysts and performance certainty, layout domestic replacement leaders, such as $SMIC(00981.HK)$ ， $HUA HONG SEMI(01347.HK)$ and so on. At the same time, avoid dependency on US supply chain players, such as $德州仪器 (TXN.US)$ ， $英特尔 (INTC.US)$ and so on.

Risk Hedging: The trade war is not completely over, and stock volatility will continue to intensify in the short term. As ordinary investors, it is important to constantly monitor and control risks, which can be done by allocating part of the portfolio to gold Assets for risk hedging. The simplest method is to use Efund Gold ETF for allocation, which is easy and flexible, such as $SPDR Gold ETF(GLD.US)$ we have also detailed this in our previous instructional courses, and those interested can click to view.What Efund Gold ETFs are available? How to choose?