The Biden administration has intensified efforts to confront China’s growing influence in the semiconductor industry by launching an investigation into the practices that have led to China’s dominance in legacy chip manufacturing. The probe, initiated by the US Trade Representative (USTR), aims to determine if China’s reliance on state support constitutes unfair competition that threatens American industries and national security.
According to the USTR, there is substantial evidence that China is pursuing aggressive tactics driven by significant state backing to establish market dominance in the semiconductor sector. Allegations include cyber intrusions, forced transfers of technology, and underpricing chips by 30% to 50%, often below production costs, which undermines competitors’ viability in the market.
Legacy semiconductors are critical for a range of applications, from automotive to defense systems, and have become a focal point in the broader US-China tech rivalry. John Neuffer, CEO of the Semiconductor Industry Association (SIA), expressed support for the USTR’s action and emphasized the need for a proactive approach to build domestic semiconductor capabilities and generate demand for American-made chips.
Amid increasing sanctions on advanced semiconductor technologies, analysts warn that imposing restrictions on legacy semiconductor production may have profound effects on China’s aspiration for self-sufficiency and its ability to source materials globally. As China plans to dominate approximately 60% of the new global capacity for legacy chips by 2030 under its "Made in China 2025" initiative, it has witnessed a rapid increase in its share of semiconductor production capabilities.
The USTR’s investigation also highlights concerns regarding China’s anti-competitive practices and their adverse impact on US economic security and industry competitiveness. Katherine Tai, the US Trade Representative, noted that China’s actions not only threaten American jobs but also compromise critical supply chains vital for national defense and other essential sectors.
As the investigation unfolds, it signals significant strategic implications. Both sides have resorted to reciprocal actions, with previous US export controls triggering China to investigate American tech companies. The ongoing scrutiny will assess the vulnerabilities in US supply chains, particularly in sectors like healthcare and military manufacturing, and will include a public hearing set for March 2025 to gather industry insights.
The outcomes of this investigation may have lasting consequences for US-China relations and the global semiconductor landscape, potentially reshaping supply chains and leading to increased operational costs for businesses reliant on Chinese-made components. The semiconductor industry appears poised for a significant transformation, pressuring US firms to diversify their sourcing and strengthen domestic fabrication efforts.
