US launches investigation into China's semiconductor industry

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The United States has launched an investigation into alleged anti-competitive measures taken by China to support its semiconductor industry, just weeks before the Biden administration hands over to President-elect Donald Trump.

The Office of the U.S. Trade Representative said it is investigating China's actions, policies and practices aimed at targeting the semiconductor industry for domination.

The investigation will be conducted under Section 301 of the US Trade Act and will initially target what the USTR called fundamental semiconductors, including those used in the automotive, healthcare, infrastructure, aerospace and defense.

It's the latest in an escalating trade war over semiconductors, raising fears of serious disruptions to international supply chains.

Potential outcomes of a Section 301 investigation include import restrictions or new tariffs on shipments from China of the types of chips used in cars, appliances and large appliances. public, a decision that would be up to the Trump administration.

Washington on Monday accused China of using numerous anti-competitive and non-market means, including setting and pursuing market share targets, to achieve indigenization and self-sufficiency. China's alleged tactics were aimed at achieving dominance of the semiconductor industry in China and global markets, USTR said.

After several years of focusing its semiconductor policy on the most advanced processors needed to create advanced artificial intelligence, Washington is turning its attention more to the mature segment of the market, with chips manufactured in using what the industry calls legacy production systems.

Makers of advanced chipmaking equipment, such as ASML, already cannot sell their most sophisticated tools to Chinese chipmakers, hampering China's progress in AI and reducing its efforts to build a rival to Nvidia, based in Silicon Valley.

However, this has not stopped Chinese chipmakers from making huge investments to increase production of traditional semiconductors. Some analysts estimate that China is on track to double its chipmaking capacity by the end of the decade, thanks to subsidies from Beijing.

Beijing's Commerce Ministry said it strongly opposed the latest 301 investigation, believing such action would disrupt global supply chains and harm the interests of U.S. businesses and global consumers.

He noted that U.S. companies dominate the global chip market and that the U.S. government has provided huge subsidies to its domestic chip industry. Beijing also issued a thinly veiled warning of retaliation, saying China would take all necessary measures to defend its rights.

U.S. and European semiconductor industry executives have warned that local chipmakers could suffer the same type of problems that the influx of low-cost Chinese solar panel imports has caused Western producers in recent years. Relying on Chinese suppliers could also create national security concerns for the United States, officials fear.

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Often overlooked in the hype around AI, the importance of traditional semiconductors became evident during the Covid-19 pandemic, when factory shutdowns triggered widespread shortages of common electronics products.

A U.S. Commerce Department report released earlier this month found that China's recent increase in mature node semiconductor production has already begun to cause pricing pressure that could weaken the competitive position of node suppliers. American chips.

More than two-thirds of U.S. companies' products use chips produced in Chinese foundries, according to the report.

China has for decades viewed its dependence on the United States and other countries as a fundamental national security vulnerability. But it has struggled to shed its reliance on foreign companies for key design and manufacturing technologies needed to make increasingly sophisticated chips.

Earlier this month, Washington imposed 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 exports of advanced memory chips needed for AI hardware.

Beijing quickly retaliated by banning the shipment to the United States of key minerals and metals used in chip production. It also opened its own investigation into Nvidia for alleged violations of the country's anti-monopoly law.

Video: Chinese manufacturers are under pressure | FT transaction

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