As tariffs disrupt integrated global supply chains, China technology companies review strategies

Wang Wei, a sales manager at Shanghai-based IT startup Cang Ding, is grappling with the immediate consequences of the escalating rounds of tariffs in the China-US trade war. A signed deal to import a US storage system for a Chinese client is now jeopardized.

This week, China has increased tariffs on imports from the US to 84 percent from 34 percent, responding to the US raising its tariffs on imports from China.

"This situation forces me to wait and see," Wang told Shanghai Daily. "Otherwise, we will have to try to find domestic suppliers for clients in the future."

Wang's experience is not unique. Escalating trade tensions between the US and China, marked by reciprocal tariff hikes, are sending ripples through the tech industry.

Companies of all sizes, from startups to multinational giants, are seeking ways to mitigate, or at best minimize, the impact of tariffs.

At the same time, the levies are also being viewed as a catalyst to encourage more rapid development of China's domestic integrated-circuit industry.

Global supply chains under strain

The tariff war poses a clear threat to the globally-interconnected technology supply chain. Apple's iPhones are one example. Components for the phones made in China are sourced from various countries.

Like phones, vehicles and other modern electronics products also rely on global commerce for thousands of components. Chips designed in the United States are produced in Taiwan and assembled on the Chinese mainland, while screens and sensors coming from Japan and South Korea. They are called "Apple/Tesla/Nvidia supply chains" in the industry.

The Chinese government has been shoring up jittery stock markets and companies with policy reassurances and pledges of more stimulus measures.

Researcher Canalys has warned that the tariff war could hinder a recovery in the global market for personal computers. First-quarter global PC sales grew 9.4 percent to 62.7 million units.

Tech firms scramble for solutions

Tech firms are rapidly seeking ways to enhance the resilience of supply chains and lessen the impact of tariffs.

Following the initial shot across the bow in the tariff war, China's Ministry of Commerce held a roundtable discussion last Sunday with US companies like Tesla, GE HealthCare and Medtronic, pledging continued support for multinational operations in China.

Several Chinese-listed tech companies, including those on the Nasdaq-style Shanghai STAR Market, have reported minimal impact from the tariffs so far, citing their small footprint in the US market.

However, companies with significant overseas sales are feeling the heat. They are exploring manufacturing substitutions in low-tariff regions or establishing overseas production bases.

Hunan Province-based Lens Technology, with 58 percent of its business overseas, trades with customers using "free on board" (FOB) prices, shifting the tariff burden to importers. Goertek, a Chinese acoustic components supplier, confirmed that its "major US-based customer," believed to be Apple, has applied for tariff exemptions, citing the unsustainable costs for the supply chain.

Reports suggest that iPhone prices could soar by US$350 due to the tariffs.

"Maybe American consumers eventually will have to swallow the additional cost," said a US-based tech company employee, who also declined to be identified because of the sensitivities involved.

Sensitivities rife

BOE Technology has announced a 1.5 billion-yuan (US$205.3 billion) share buyback plan to reassure investors and express confidence in China's economy.

Several dozen Chinese-listed firms, including tech giants like Midea and CATL, recently announced similar share-repurchasing plans valued in the multi-billions of yuan. Their actions have drawn support from the central and local governments, including Shanghai.

"The share buybacks transform industrial advantage, such as Shanghai's integrated circuits and biomedical industries, into valuation support points for the capital market," said Zhu Keli, chairman of the China Institute of New Economy.

Opportunity for domestic chip industry

The tariff situation is also seen as an opportunity for China to accelerate the development of its domestic integrated circuit industry. Industry analysts predict that equipment and materials segments will benefit directly.

"There may be short-term disruption under the tariffs, but the Chinese semiconductor industry will benefit in the end," said industry researcher ICWise. "China's semiconductor industry has established a basically complete industrial chain, with the resilience to deal with the impact of US tariffs."

Technology giant Huawei, collaborating with the DeepSeek team, is optimizing AI model performance on domestic infrastructure. The next-generation DeepSeek model, expected to be released within months, will perform better on Huawei's infrastructure than on Nvidia-backed systems, a Huawei official told Shanghai Daily.

Hygon Information Technology, a Chinese chip developer, is anticipating that the tariffs will accelerate the substitution of foreign components with domestic alternatives.

The company has built a robust domestic hardware and software ecosystem around its C86 chip technology, with "thousands of partners and clients" covering government, finance, communications, transportation, health care and education.

Hygon's stock surged 5.6 percent this week, reaching a market value of 328.9 billion yuan on Wednesday.

Cang Ding's Wang noted the availability of domestic DeepSeek-powered AI servers but acknowledged the need for patience in finding domestic substitutes for company-level storage products.