- The U.S. has initiated an investigation into China’s semiconductor industry over alleged anticompetitive practices.
- The U.S. Trade Representative’s office is leading the probe, focusing on foundational semiconductors integral to various products.
- The investigation is being conducted under Section 301 of the Trade Act, indicating the seriousness of the issue.
- The probe will focus on China’s foundational semiconductors production and its impact on U.S. commerce.
The United States has recently initiated an investigation into China’s semiconductor industry. The probe is driven by concerns over Beijing’s alleged use of extensive anticompetitive and non-market means to undermine other economies. This move has been met with criticism from Beijing, which has labeled the investigation as protectionist and vowed to defend its interests.
The U.S. Trade Representative’s (USTR) office is leading the investigation, focusing primarily on foundational semiconductors. These components are integral to a wide range of products, from automobiles to medical devices. The USTR office has expressed concerns that China’s actions may pose significant burdens for U.S. commerce.
The USTR office further elaborated on the potential implications of Beijing’s practices, stating that they could undermine the competitiveness of American industry and workers, critical U.S. supply chains, and U.S. economic security. This statement underscores the gravity of the situation and the potential impact on the U.S. economy.
U.S. Uses Section 301 of the Trade Act
The investigation is being conducted under Section 301 of the Trade Act, a tool previously utilized during President-elect Donald Trump’s first administration to justify tariff hikes on Chinese products. This indicates the seriousness with which the U.S. is approaching this issue.
USTR Katherine Tai, referring to the People’s Republic of China, stated, We have seen time and again, a pattern of harmful impact from nonmarket policies and practices across industries that the PRC has targeted for worldwide market dominance. Tai cited previous instances involving steel, aluminum, solar cells, electric vehicles, and now, semiconductors.
Tai further elaborated on the potential consequences of China’s actions, stating, This is enabling its companies to rapidly expand capacity and to offer artificially lower-priced chips that threaten to significantly harm and potentially eliminate fair, market-oriented competition.
China’s Rapid Expansion in Semiconductor Production
The USTR office has noted that China has nearly doubled its global share of foundational logic semiconductors production capacity in just six years. It is projected that China’s share will reach about half the world’s capacity by 2029, based on announced new fabrication plants. This rapid expansion is reportedly discouraging investment by market-oriented actors.
Commerce Secretary Gina Raimondo revealed that an analysis of the U.S. semiconductor supply chain found that two-thirds of U.S. products contain Chinese-made foundational chips. She further added that about half of companies didn’t know whether they had Chinese chips in their products.
In recent years, President Joe Biden has sought to bolster U.S. chipmaking capabilities to reduce reliance on other countries. This latest probe will initially focus on China’s foundational semiconductors production, including the extent these are used in other products like medical devices and vehicles.
The investigation will also consider whether Beijing’s policies on inputs for semiconductor fabrication contribute to burden or restriction on U.S. commerce, according to the USTR’s office. National Economic Advisor Lael Brainard stated, This investigation is part of our broader strategy to strengthen the resilience of our supply chains and revitalize domestic manufacturing. Officials will have a year to handle the investigation and decide on responses.