Shares of U.S. semiconductor companies saw a significant divergence in Monday’s premarket trading, as the market responded to the latest tariff developments from China. Advanced Micro Devices Inc (NASDAQ:AMD) stock climbed 2.3%, while Qualcomm Incorporated (NASDAQ:QCOM) shares rose 1%, following news that U.S. chipmakers outsourcing their manufacturing will not be subject to China’s retaliatory tariffs on U.S. imports. Conversely, U.S. chip manufacturers fell: Texas Instruments Incorporated (NASDAQ:TXN) tumbled 6.2%, Intel Corporation (NASDAQ:INTC) was down 2%, Analog Devices Inc (NASDAQ:ADI) dropped 2.4%, and ON Semiconductor Corporation (NASDAQ:ON) fell 2.2%.
The China Semiconductor Industry Association (CSIA) issued an "urgent notice" indicating that for integrated circuits, the declared country of origin for customs purposes would be the location of the wafer fabrication plant. This classification is critical for companies like AMD and Qualcomm, which outsource their chip manufacturing to Taiwan Semiconductor Manufacturing Company (TSMC), as their products will be considered of Taiwanese origin, thus exempting them from the tariffs.
However, companies with U.S.-based fabrication plants, such as Intel, Texas Instruments, Analog Devices, and ON Semiconductor, may face tariffs of 84% or higher, as their chips could be classified as U.S. origin. This development comes on the heels of Beijing’s decision to raise tariffs on U.S. imports to 125%, in retaliation against U.S. President Donald Trump’s increase of duties on Chinese goods to 145%.
The exemption from China’s tariffs provided a boost to AMD and Qualcomm shares, as it alleviates some of the cost pressures associated with the trade tensions. On the other hand, the companies operating fabrication plants within the U.S. are facing headwinds, as the new tariff rates pose a significant threat to their cost structures and competitive positioning.
Investors are closely monitoring the situation, as the semiconductor industry’s highly specialized and multi-country supply chains make the impact of tariffs particularly complex. The recent move by Chinese authorities to clarify the country of origin for chip imports has brought some relief to certain chipmakers, but it has also heightened concerns for others with domestic manufacturing operations.