China’s Semiconductor Industry Under U.S. Investigation with Heavy Sanctions Expected

Biden administration announced on Monday it is launching a new investigation into Chinese-made “legacy” general-purpose semiconductors to address concerns over market practices and competition.

General-purpose semiconductors are widely used in the automotive, consumer electronics, and defense systems industries. While not cutting-edge technology, these chips are crucial to many sectors, and the White House is worried that China’s actions in this market are undermining competition and disrupting global supply chains.

In a statement, the White House expressed concern that China uses “non-market policies and practices” to manipulate the semiconductor industry, particularly by flooding the market with low-cost chips. To address these concerns, the U.S. is initiating a “Section 301” investigation to examine China’s government intervention in its semiconductor industry, including its policies and business practices.

The probe will also evaluate the U.S.’s reliance on Chinese-made general-purpose semiconductors used in industries such as telecommunications, aerospace, medical devices, consumer electronics, and power grids.

While the U.S. has already targeted China’s advanced AI semiconductors with export controls, this investigation expands the focus to include general-purpose chips. Although these chips are based on older technology, China has been making strides in mass production, which has allowed it to increase its market share despite being behind industry leaders like TSMC and Samsung Electronics.

If the investigation finds that China’s practices are unfair or discriminatory, the U.S. could impose significant tariffs or restrictions on Chinese-made general-purpose semiconductors.

As the Trump administration prepares to take office in 2025, it is expected to continue pressuring China, including imposing higher tariffs on Chinese products. The Biden administration has continued many trade policies started under Trump, raising tariffs on various products, from electric vehicles to semiconductors.

Since January, the U.S. has imposed a 50% tariff on Chinese semiconductors and recently announced plans to apply similar tariffs to solar wafers and polysilicon starting next year. Trump has pledged to increase tariffs on all Chinese-made goods by 60%.

In response, China has hinted at potential retaliation. The Chinese Ministry of Commerce criticized the U.S. for its “double standards,” arguing that while the U.S. subsidizes its own semiconductor industry through the CHIPS Act and holds a dominant share of the global market, it still paints China’s industry as a threat. China also pointed out that it imports more semiconductors from the U.S. than it exports.