US 50% China Semiconductor Tariff

[EEVblog]

https://twitter.com/POTUS/status/1790385220983677016

I just imposed a series of tariffs on goods made in China:
 
25% on steel and aluminum,
50% on semiconductors,
100% on EVs,
And 50% on solar panels.
 
China is determined to dominate these industries.
I'm determined to ensure America leads the world in them.

Don't make me lock this thread or delete posts because you want to talk politics.
If you want to talk about the practical aspects of this, without the politics, please do so, otherwise do not post in this thread.

My first question is how does this work with say Aliexpress or LCSC etc component orders?

[wraper]

Does he want to kill the remaining electronics production? It's literally forcing manufacturers to outsource the assemblies or full production abroad.

[5U4GB]

Seems a totally crazy thing to do, half the planet depends on the shopping list of stuff that's just been made vastly more expensive if you're in the US.  So its main effect seems to be to make US industry even less competitive globally than it already is.  As the previous poster said, the only thing I can see happening is it driving even more manufacturing and business out of the US.

Let's just hope that the usual suspects of governments that slavishly copy everything the US does just because the US did it don't copy this particular move.

[woofy]

Good luck with that one, seems very short sighted to me.
They may be able to wack a tariff on direct semiconductors from china, but any company needing a chinese device will find a way around it. Simply import through another country.
If the tariff is phrased as "of chinese origin", then define "chinese origin". Here in the UK "country of origin is defined as the last country that major work was performed on, so if a kit was produced in the UK that contained a chinese semiconductor, then the country of origin of that kit is the UK.
Then again, companies could just shift their manufacturing overseas.
It all depends on the exact wording.

[forrestc]

My first question is how does this work with say Aliexpress or LCSC etc component orders?

Tariffs are rarely actually applied to tiny orders when importing into the US.   So I'm guessing that a typical hobby-quantity order isn't going to be affected at all, especially since most aliexpress-type sellers intentionally are obtuse on their customs paperwork in order to avoid tariffs.   

For production-quantity orders, you do get charged for the import duty.  The existing tariff in the US is actually 25% on semiconductors and has been a few years now.  The biggest PITA is that distributors are very inconsistent with whether prices include tariff fees or not, so it can be difficult to compare the actual landed cost between suppliers of the same semiconductors.  My purchasing person now knows which suppliers include the tax upfront, which hide it as an 'addon', and which don't mention it at all until you get charged for it unexpectedly.  Suppliers in the last category have become suppliers of last resort for us.   We still get surprised now and again as parts shift manufacturing locations since sometimes the manufacturing site changes unexpectedly.

So, I guess the summary is:  If you aren't seeing any effect today, you're not going to see any when this takes effect, other than certain things manufactured in the US will likely get more expensive. 

Note that there are certain ways for products which are made in China to be reprocessed such that they are no longer considered to be made in China.  For example, if you take silicon from a chinese fab, and then do the leadframe and packaging in a second country, the semiconductor can be considered to be made in the other country.   I know this works the other way as well.  For example, Microchip Technology has fabs in the USA, but most of the packaging is in Thailand or the Philippines.  So when I buy a semiconductor from Microchip Technologies, it's almost always tagged with an origin in Thailand or the Philippines even though the silicon was most likely produced in a fab in the USA.

[tszaboo]

Does he want to kill the remaining electronics production? It's literally forcing manufacturers to outsource the assemblies or full production abroad.

It's easy. You have 50% VAT import tax on semiconductors, and normal import tax on PCBAs or products, then you assemble it abroad and import the PCBAs. Task failed successfully. Also, enjoy EU exporting their electronics with Chinese parts inside. And being more competitive in pricing (and honestly, usually also better quality).

[JPortici]

https://twitter.com/POTUS/status/1790385220983677016

I just imposed a series of tariffs on goods made in China:
 
25% on steel and aluminum,
50% on semiconductors,
100% on EVs,
And 50% on solar panels.
 
China is determined to dominate these industries.
I'm determined to ensure America leads the world in them.

Don't make me lock this thread or delete posts because you want to talk politics.
If you want to talk about the practical aspects of this, without the politics, please do so, otherwise do not post in this thread.

My first question is how does this work with say Aliexpress or LCSC etc component orders?

Italy/Europe to follow soon.

Italian automotive is likely going to become an assembly line for chinese products to bypass tariffs (stellantis dismembering and selling magneti marelli, then cutting Fiat production but keeping all that french garbage*, and all italian manufactoring capacity on hold, but there were talks months ago about letting chinese firms in to produce cars here, but only the final stage assembly)
Good for the low specialization workers, as tens of thousands of jobs may not be on the line after all, but bad because many design and engineering jobs have gone away and unlikely to come back. We still rock as OEM for most of the european brands, but the current state of things and expectations is disturbing.

But tariffs look like the only countermeasure from dumping.

*I consider PSA being equal quality than fiat, both are at heart cheap brands except they have many absurd design choices that can be explained as doing it different than anybody else just for the sake of it, and parts that were broken from design - see the Adblue fiasco.

[5U4GB]

https://twitter.com/POTUS/status/1790385220983677016

Oh, and don't forget the excuse for this, that the Chinese government is subsidising its own manufacturers and that's anti-competitive.  Something the US would never, ever do, and pay no attention to posts like this from the White House.  I mean the CHIPS Act alone is a $39 billion subsidy for US manufacturers, and that's just one of many.

[m k]

My first question is how does this work with say Aliexpress or LCSC etc component orders?

My guess is that US tries to implement EU system, where everything goes through customs, more or less.

It's easy if there is a semi automated procedure.
The one that doesn't obey will be kicked out completely, so no imports from or through them.
So the seller is obligated.

We have also a partially reversed VAT.
Means that buyer deducts VAT before paying.

[wraper]

Good luck with that one, seems very short sighted to me.
They may be able to wack a tariff on direct semiconductors from china, but any company needing a chinese device will find a way around it. Simply import through another country.

It does not work like that, it's about country of origin, not from where it's shipped. Sure it's unlikely anyone would bother with tiny quantities, but no way around it for any serious production (unless you want to risk being prosecuted).

[wraper]

https://twitter.com/POTUS/status/1790385220983677016

Oh, and don't forget the excuse for this, that the Chinese government is subsidising its own manufacturers and that's anti-competitive.  Something the US would never, ever do, and pay no attention to posts like this from the White House.  I mean the CHIPS Act alone is a $39 billion subsidy for US manufacturers, and that's just one of many.

So far seems to work about as well as $7.5 billion subsidy for EV chargers - 8 charging stations built in two years.

[wraper]

Does he want to kill the remaining electronics production? It's literally forcing manufacturers to outsource the assemblies or full production abroad.

It's easy. You have 50% VAT on semiconductors, and normal tax on PCBAs or products, then you assemble it abroad and import the PCBAs. Task failed successfully. Also, enjoy EU exporting their electronics with Chinese parts inside. And being more competitive in pricing (and honestly, usually also better quality).

VAT is deductible though, import tax generally is not.

[tautech]

Hypocrites.

Western multinationals thought nothing of shutting down local production and shipping it to the East.
Boards, Managers and shareholders got large profits from reduced BOM.
Tough luck for the local employees !

They made the East wealthy to where it could challenge the remaining West production.
Now they wanna penalise the East for the profits they have given the Western multinationals ?

Again Hypocrites and bloody shortsighted ones at that.

[ebastler]

Don't make me lock this thread or delete posts because you want to talk politics.
If you want to talk about the practical aspects of this, without the politics, please do so, otherwise do not post in this thread.

Hypocrites. [...]

 

[rsjsouza]

This looks like simple posturing from this misgovernment. US mainland manufacturing is the main target of such tax hike and import taxes on independent parts will only impact manufacturers that do local assembly. Given that larger corporations can shift manufacturing to Asia much easier than small companies, this will erode profit margin or the markets for the latter.

Also, in my experience of having lived in a country with hefty taxes, people will find a way to circumvent this. Just mount the part in a board and it ceases to be a "semiconductor" but instead "assembled goods". Create a bag of parts and, while crossing the border, it falls into a different tax category. And so on.

These tactics will hurt the local entrepreneurs and small manufacturing.

[S. Petrukhin]

https://twitter.com/POTUS/status/1790385220983677016

Oh, and don't forget the excuse for this, that the Chinese government is subsidising its own manufacturers and that's anti-competitive.  Something the US would never, ever do, and pay no attention to posts like this from the White House.  I mean the CHIPS Act alone is a $39 billion subsidy for US manufacturers, and that's just one of many.

Do you have documents confirming this, or is it your feeling?    After all, you can name any fictional reason and start acting.

China "subsidizes" with cheap production, hard work and difficult working conditions, which, I think, no one in the West will agree to.
In addition, it is not necessary to issue subsidies in cash, you can simply order a telescope with an initial cost of $400 million, and eventually pay $5 billion for it. For example. 
Or find a way to keep the defense industry busy...

I'm sorry, but from the outside, the policy of the West looks like nonsense or caring only about the money of the richest.
The greed of the Western rich gave production to China, Malaysia, Philippines, is easier to use slave labor there.
But the Chinese did not want to be just slaves. 

[SeanB]

Going to be a lot of US production moving south of the border to Mexico, and similarly to Canada, and only finished goods coming in, avoiding these surcharges. Also will be a whole lot of stuff that gets shipped to an intermediate country to get the paperwork washed, container in, washed container out, with the same seals still on it, and it did not even leave the ship.

[S. Petrukhin]

Going to be a lot of US production moving south of the border to Mexico, and similarly to Canada, and only finished goods coming in, avoiding these surcharges. Also will be a whole lot of stuff that gets shipped to an intermediate country to get the paperwork washed, container in, washed container out, with the same seals still on it, and it did not even leave the ship.

Someone will get a good business and win a lot of money that ordinary people will pay - that's how it works.
But you can't talk about politics - everyone is good with it, there are no culprits. 

[mendip_discovery]

Not surprising really.

The 100% on cars is going to hurt the sales of BYD which seems to be a fast growing business at the moment. Might give tesla a chance to catch up with sales again.

Its going to push up the prices of the 'made in America' stuff that uses Chinese parts.


But like most things most will just carry on like normal and pay for it as they don't have any other choices.

[ELS122]

>Asks geo-political question.
"Dont you get into politics"


It's not practical for any consumer, it's not practical for companies. It's practical for reviving domestic businesses which were driven out of the market because they couldn't compete with the pricing of the semiconductors build in china using essentially slave labor. And since all other countries that have infrastructure to allow for semiconductor manufacturing have more human rights and enforced minimum wages, they could never compete with the prices China can offer.
Tariffs would break this noncompetitive monopoly China has on cheap semiconductors, but for the consumer it would obviously mean higher prices.

[wraper]

Not surprising really.

The 100% on cars is going to hurt the sales of BYD which seems to be a fast growing business at the moment. Might give tesla a chance to catch up with sales again.

BYD sales were down 43% on 1Q 2024 so Tesla is ahead again

[S. Petrukhin]

BYD sales were down 43% on 1Q 2024 so Tesla is ahead again

Who is BYD?

[coppice]

Here in the UK "country of origin is defined as the last country that major work was performed on, so if a kit was produced in the UK that contained a chinese semiconductor, then the country of origin of that kit is the UK.

Country of origin is now pretty much a global term. Without some common standards for these terms each component would need to be produced specifically for it end user country. However, it leads to things like the Philippines and Malaysia appearing to be among the world's biggest semiconductor makers from their markings, because there are major packaging plants there. So, it ends up obscuring more than illuminating.

[tautech]

BYD sales were down 43% on 1Q 2024 so Tesla is ahead again

Who is BYD?

Build Your Dream, Asian EV manufacturer.
Like Polestar (Asian/Volvo joint venture) they are big over there and growing fast.

[mawyatt]

The Semiconductor Economic Field is quite unique & complex indeed.

1) What % of the chip cost is directly attributed to manual labor?

2) What % of the chip is attributed to NRE development cost?

3) What % to fab/facility cost?

4) What's the time line and direct cost to steal copy a competitors chip, when to break even?

5) When is it profitable to move a chip design to a new smaller feature process?

6) What benefits/subsidies do different fab/facilities location provide?

If one thinks about it, when is it economically $ viable for a Semi Company to build a new SOTA fab (>$25B today), how many acres of Silicon does it take to break even on this investment? What Harvard MBA would even consider this investment unless some "outside" investments (subsidies) were at stake.

These "investments" may not all be about $, these might include country security/wellbeing/future as well. Ever wonder what's behind the TSMC 2 fabs being built in Arizona???

Yes, the Semiconductor Economic Field is quite unique & complex indeed, where Economic entails more than just $

So the decision on this imposed tariff seems short-sided and ill advised indeed, but here in US we've come to expect such from the Washington Wizards (Wayne's World context, NOT) we've elected over the past half century  

Best,