The United States launches investigation into China’s semiconductor industry

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Just weeks before the Biden administration hands over power to President-elect Trump, the United States has launched an investigation into China’s alleged anti-competitive measures to support its semiconductor industry.

The Office of the U.S. Trade Representative said it was investigating “China’s actions, policies and practices aimed at competing for dominance in the semiconductor industry.”

The investigation, which will be conducted under Section 301 of the U.S. Trade Act, will initially target what the Office of the U.S. Trade Representative calls “essential” semiconductors, including those used by the automotive, healthcare, infrastructure, aerospace and defense industries.

It marks a worsening of a tit-for-tat trade war in semiconductors, raising concerns about serious disruptions to international supply chains.

Potential outcomes of the Section 301 investigation include import restrictions or new tariffs on chips used in cars, home appliances and consumer devices from China – a decision that would be decided by the Trump administration.

Washington on Monday accused China of using “a wide range of anti-competitive and non-market tactics, including setting and pursuing market share targets, to achieve localization and self-sufficiency”. The U.S. Trade Representative’s Office said China’s alleged strategy is aimed at achieving dominance of the semiconductor industry in China and global markets.

China’s Foreign Ministry did not immediately respond to a request for comment.

After several years of semiconductor policy focused on the cutting-edge processors needed to create advanced artificial intelligence, Washington is turning its attention more toward mature markets that manufacture chips using what the industry calls “traditional” production systems.

Advanced chipmaking equipment makers such as ASML have been restricted from selling their most advanced tools to Chinese chipmakers, hampering China’s progress in artificial intelligence and limiting its efforts to build a rival to Silicon Valley’s Nvidia.

However, this has not stopped Chinese chipmakers from making huge investments to expand the production scale of traditional semiconductors. Some analysts estimate that China’s chipmaking capacity is expected to double by the end of the century, driven by subsidies from Beijing.

U.S. and European semiconductor executives have warned that local chipmakers could run into the same problems that massive imports of cheap solar panels from China have posed to Western producers in recent years. Officials worry that reliance on Chinese suppliers could also create national security issues for the United States.

The importance of traditional semiconductors is often overlooked amid the hype about artificial intelligence, but has become apparent during the Covid-19 pandemic when factory closures have led to widespread shortages of everyday electronics.

A U.S. Commerce Department report earlier this month found that China’s recent increase in mature-node semiconductor production “has begun to create pricing pressures that could weaken the competitive position of U.S. chip suppliers.”

The report said that more than two-thirds of U.S. company products use chips produced by Chinese foundries.

For decades, China has viewed its dependence on the United States and other countries as a fundamental weakness in its national security. But it has struggled to wean itself off reliance on foreign companies for key design and manufacturing technologies needed to make increasingly complex wafers.

Earlier this month, Washington issued new export controls targeting China’s ability to make the most advanced chips, including tighter restrictions on the shipment of semiconductor manufacturing tools and a ban on the export of advanced memory chips needed for artificial intelligence hardware. .

Beijing quickly hit back, banning shipments to the United States of critical minerals and metals used in chip production. It also launched an investigation into Nvidia’s alleged violations of the country’s antitrust laws.