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How Trump’s China Tariffs Will Make U.S. Chipmakers Pay Fees on Their Own Chips

June 15, 2018, 11:40 PM UTC

Tariffs the Trump administration plans to impose on Chinese goods will rebound on U.S. chipmakers, says the Semiconductor Industry Association (SIA). The group noted that most semiconductors imported into the U.S. aren’t made by Chinese firms, but were manufactured in the U.S., and exported for assembly, testing, and packaging into products due to China’s advantageous labor costs. This will lead to U.S. chipmakers paying tariffs on the re-importation of their chips in value-added finished products.

The administration’s stated basis for tariffs on some products is the theft and appropriation of intellectual property and manufacturing techniques owned by American firms. Many in the industry acknowledge this remains a serious problem as China continues its efforts to rely less on imports and non-Chinese technology and manufacturing for electronics, airplanes, cars, and other goods sold within the country.

China-based Foxconn is a notable example for both managing the assembly of high-value brand-name products, like Apple’s iPhone, and advancing homegrown technology to serve the Chinese market. The firm also builds factories in other countries, including a plant slated for Wisconsin, which will receive significant financial incentives from the state.

The SIA’s spokesperson said, “While the U.S. semiconductor industry shares the Trump Administration’s concerns about China’s forced technology transfer and intellectual property (IP) practices, the proposed imposition of tariffs on semiconductors from China, most of which are actually researched, designed, and manufactured in the U.S., is counterproductive and fails to address the serious IP and industrial policy issues in China.”

Some semiconductor manufacturers with U.S. headquarters make some chips within China that would be subject to import tariffs as well, including Intel, Micron, and Texas Instruments.