China's semiconductor exports surge amid US tariff tensions, but future uncertainty looms

[WORLD] China's semiconductor exports have experienced significant growth, reaching approximately USD 160 billion in 2024, marking a 17.4% year-on-year increase. Despite escalating US tariffs and export controls, the nation's chip industry has demonstrated resilience. However, recent developments, including partial tariff exemptions and potential future restrictions, introduce a new layer of uncertainty for the sector.​

Resilient Growth Amid Trade Tensions

In 2024, China's integrated circuit exports set a historical record, totaling USD 159.5 billion. This achievement marked the 14th consecutive month of growth, underscoring the sector's robustness despite intensified US export controls and sanctions targeting Chinese tech giants like Huawei and ZTE.​

The expansion is attributed to China's strategic focus on mature semiconductor processes, which now account for a larger share of global production capacity. Collaborations with European chipmakers, such as STMicroelectronics and NXP, have further bolstered the sector's capabilities.​

China has also accelerated its investments in domestic semiconductor production, allocating over USD 40 billion in subsidies through state-backed funds such as the National Integrated Circuit Industry Investment Fund. These efforts aim to reduce reliance on foreign technology and develop indigenous alternatives to key components like lithography machines, which are currently dominated by Dutch firm ASML. Despite technical hurdles, domestic firms such as SMIC have made incremental advances in chip fabrication technologies, particularly in nodes above 14nm.

In parallel, the government has introduced favorable tax policies and fast-tracked infrastructure projects to support new chip fabrication facilities across provinces including Guangdong, Jiangsu, and Anhui. Industry analysts suggest these moves could enable China to close the technological gap with global leaders, particularly in legacy and mid-range semiconductor segments where demand remains high.

US Tariff Exemptions: Temporary Relief or Prelude to Stricter Measures?

In April 2025, the US administration announced exemptions for certain electronic products, including smartphones, laptops, and semiconductors, from new tariffs. This move led to a surge in tech stocks, with companies like Apple and Nvidia experiencing significant gains.​

However, these exemptions are not without caveats. Products remain subject to existing tariffs and may be reassigned to different categories, potentially leading to future restrictions. Commerce Secretary Howard Lutnick indicated that additional tariffs targeting semiconductors and tech components could be introduced under a separate investigation.​

Meanwhile, bipartisan sentiment in Washington continues to push for stricter oversight of tech-related exports to China. Recent legislation introduced in Congress seeks to broaden the scope of export controls, particularly for AI chips and advanced semiconductor manufacturing equipment. This legislative momentum reflects growing national security concerns over China's potential use of these technologies in military and surveillance applications, a stance echoed by several US allies.

Strategic Shifts and Market Dynamics

In response to escalating tariffs, some Chinese firms are considering relocating production to countries like Malaysia to circumvent US duties. These companies have sought assurances from the Malaysian government regarding tariff exemptions for locally manufactured products.​

Despite these strategies, the global semiconductor market remains volatile. Analysts project a 45% chance of a US recession, which could further impact demand for electronic products and, by extension, semiconductor exports.​

Adding to the complexity, geopolitical developments in the Asia-Pacific region are influencing global supply chain decisions. Rising tensions in the Taiwan Strait have prompted multinational companies to reevaluate risk exposure and diversify manufacturing bases. Taiwan’s TSMC, a dominant player in advanced chipmaking, has reiterated its plans to expand operations in the US and Japan to mitigate geopolitical threats and meet Western demand outside of Asia.

While China's semiconductor exports have demonstrated remarkable growth, the industry's future is clouded by ongoing trade tensions and potential policy shifts. The sector's ability to adapt to these challenges will be crucial in maintaining its upward trajectory.​

As global markets await further developments, stakeholders are advised to monitor policy changes closely and consider strategic adjustments to mitigate risks associated with the evolving trade landscape.​