A few weeks before the inauguration of US President-elect Donald Trump, the United States launched an investigation into alleged anti-competitive measures by China to support its semiconductor industry, UNN reports citing the Financial Times.
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The Office of the U.S. Trade Representative said it is investigating "China's actions, policies, and practices related to its quest for semiconductor industry dominance."
The investigation will be conducted under Section 301 of the US Trade Act and will initially target what the USTR has termed "essential" semiconductors, including those used in the automotive, healthcare, infrastructure, aerospace, and defense industries.
This is yet another escalation of a possible trade war over semiconductors, raising fears of serious disruptions in international supply chains. Potential outcomes of the investigation include import restrictions or new tariffs on chips from China that are used in cars, home appliances, and consumer devices, a decision that will be made by the Trump administration,
According to the information, Washington accused China of using "extensive anticompetitive and non-market means, including setting and achieving market share targets, to achieve indigenization and self-sufficiency". China's alleged tactics were designed to achieve dominance in the semiconductor industry in China and in global markets, the USTR said.
The Chinese Ministry of Foreign Affairs did not respond to a request for comment.
After several years of focusing its semiconductor policy on the cutting-edge processors needed to create advanced AI, Washington is paying more attention to the mature market segment, with chips made using what the industry calls "legacy" manufacturing systems.
Manufacturers of advanced chip manufacturing equipment, such as ASML, are already prohibited from selling their most sophisticated tools to Chinese chipmakers, hindering China's progress in artificial intelligence and limiting its efforts to create a competitor to Silicon Valley-based Nvidia. However, this has not prevented Chinese chipmakers from making huge investments to increase production of obsolete semiconductors. Some analysts believe that China is on track to double its chip production capacity by the end of the decade, thanks to subsidies from Beijing. Executives at semiconductor companies in the US and Europe warn that local chipmakers may suffer from the same problems that the flood of low-cost Chinese imported solar panels has caused Western manufacturers in recent years. Relying on Chinese suppliers could also create national security problems for the United States, officials fear.
The importance of legacy semiconductors, often overlooked amidst the hype around artificial intelligence, became apparent during the Covid-19 pandemic when factory closures caused massive shortages of everyday electronic goods.
According to a report by the U.S. Department of Commerce, China's recent increase in production of mature node semiconductors "has already begun to exert price pressure that could weaken the competitive position of U.S. chip suppliers." More than two-thirds of American companies' products use chips made in Chinese foundries, the report says. For decades, China has viewed its dependence on the United States and other countries as a fundamental national security vulnerability. But the country is finding it difficult to shake its reliance on foreign companies for key design and manufacturing technologies needed to create increasingly complex chips.
Earlier, Washington had already introduced new export control rules aimed at China's ability to produce state-of-the-art chips, including tighter restrictions on the supply of semiconductor manufacturing tools and a ban on the export of advanced memory chips needed for AI hardware. Beijing quickly retaliated by banning the supply of key minerals and metals used in chip manufacturing to the United States. It also launched its own investigation into Nvidia for suspected violations of the country's antitrust laws.
Recall
Chinese President Xi Jinping emphasized the importance of the partnership between China and the United States. He said that cooperation can promote the development of both countries and create new opportunities for global development.