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Nvidia, HP and Zotac Request Temporary Tariff Exemption on GPUs

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(Image credit: Shutterstock)

Nvidia, HP, Zotac and others are advocating that the Biden Administration exempt graphics cards and other electronics imported from China from the 25% import tariffs currently imposed on them — a measure taken in the midst of the broiling U.S.-China trade war by the Trump Administration. The tariffs increased the price on electronics shipped out of the country and into the U.S. market.

Following the news that the US Trade Representative (USTR) office was considering reinstating tariff exclusions towards some products currently covered under the regime, Nvidia, HP and Zotac have requested that graphics cards be included in the exemptions listing. The companies cite China's control of raw materials and their processing in the manufacturing and logistics semiconductor channels as a reason for the exclusion. As of last year, China was responsible for around 55% of global rare earth mining output, and 85% of all rare earth minerals have to go through the country in one way or another throughout their manufacturing process.

“China remains (...) the major manufacturing base of video graphics cards and personal computers in the industry. The major reason is due to the upstream supply chain remaining mostly in China,” Zotac said in its comment to the request sent to the USTR. The company further added that attempts to relocate production capacity to Taiwan are hamstrung by the fact that China controls so much of the required raw material production and logistics: the company has thus far been “(...) unable to identify alternate sources,” Zotac added.

Of course, chip designers also have to consider the broader impacts of relocating to other countries that don't already possess the manufacturing facilities and supply-chain redundancy of China. Nvidia in its comments to the USTR added that the current strain in global shipment routes (a continuing issue in our COVID-19 world) is also a case for concern.

“Freight/air cargo was severely constrained due to the tremendous reduction in passenger flights which limited the ability to expand air cargo capacity in new sites,” Nvidia added. “Given the limits on supply of semiconductors, it also would have been the wrong time to face lower yields that are associated with new sites.”

HP also commented on the semiconductor industry's dependence of China for labor-intensive, last-mile semiconductor manufacturing tasks - which, paired with the country's low cost workforce, makes it difficult for companies to successfully transition from its dependence on the country.

“AMD and Nvidia have manufacturing locations throughout Asia, in China, the Philippines, Hong Kong, Taiwan, and Malaysia. However, different product lines are sourced from designated locations. Regardless of where a graphics chip is initially produced, China is a hub for the ‘back-end’ production (i.e., labor-intensive manufacturing and testing steps) and thus the primary source for imports,” the company said. “The products HP sources are not currently produced elsewhere at sufficient capacity, quality, and compatibility needed.” 

As it's painfully clear to see in our GPU Price Index, the current availability and pricing scenario is not looking good for consumers; it's only natural that GPU-focused companies would be looking at reducing their import costs. Of course, the tariffs don't apply just to graphics cards; Apple, Google and Intel all filed similar requests with the USTR for other China-dependant electronics such as motherboards, power supplies, and trackpad devices.

The US Trade Representative’s office clarified the focus of the evaluation, saying that " (...) whether, despite the imposition of additional duties beginning in September 2018, the particular product remains available only from China,” the department said. “In addition, USTR will consider whether or not reinstating the exclusion will impact or result in severe economic harm to the commenter or other US interests, including the impact on small businesses, employment, manufacturing output, and critical supply chains in the United States." The office added that it'll “evaluate the possible reinstatement of each exclusion on a case-by-case basis.”