By Sherry Qin

Shares of Chinese chip makers rose after guidance from an industry association boosted expectations that tariffs on U.S. chips entering China could accelerate localization.

Chinese chip and chip-instrument makers jumped in China on Friday, as well as in Hong Kong, where they outperformed the Hang Seng Index's 1.2% gain. Semiconductor Manufacturing International Corp.--China's largest chip maker--rose 6.6% and 2.1% in Hong Kong and Shanghai, respectively.

China's No. 2 contract chip maker, Hua Hong Semiconductor, soared 15% in Hong Kong. Innoscience (Suzhou) Technology climbed 10% and Montage Technology added 7.1%.

That comes after China's Semiconductor Industry Association issued a notice with suggestions on declaring the origin of semiconductor imports after studying Chinese Customs documents. Some analysts say the move could shut a backdoor to bypass tariffs set by Beijing.

"Regardless of whether the 'integrated circuit' is packaged or unpackaged, the origin at the time of import declaration shall be declared as the location of the 'wafer fabrication factory,'" the association said.

The design, fabrication, packing and testing of semiconductors often takes place in different countries, making it hard for officials to identify the country of origin.

The notice came after China set a 84% tariff on U.S. products in response to President Trump's successive raising of tariffs on Chinese goods, which now stand at 145%.

Analysts say the industry group's suggestion on the origin of imports could give Chinese firms more of an edge in gaining domestic market share over U.S. rivals in mature chips and other chip-equipment and material.

Texas Instruments and Intel, who have substantial sales in China, make most of their China-bound chips in the U.S. before packaging them in Taiwan and other Southeast Asian countries.

The industry group clarified that doing so would mean the country of origin can be defined as the U.S., at the point of fabrication, rather than where the products were packaged. That would leave imports subject to higher tariff rates.

Bernstein analyst Qingyuan Liu said the clarification could see local companies get a bigger share of the market.

Domestic front-end wafer manufacturers and backend integrated circuit-packaging and testing vendors stand to benefit, Daiwa analyst Rick Hsu said, as do chip-equipment makers and suppliers of key materials such as raw wafers and chemicals.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

April 11, 2025 03:05 ET (07:05 GMT)

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