China’s Ministry of Commerce announced on Thursday an investigation into allegations of US chip dumping and unfair subsidies to American chipmakers. This move marks a significant escalation in trade tensions between the two nations and comes in response to concerns raised by the Chinese semiconductor industry. The investigation will focus on whether the US is providing its chip manufacturers with an unfair competitive advantage through incentives and grants, and whether US companies are illegally undercutting Chinese products in the market.
The probe centers around the US Chips Act, a piece of legislation that allocates approximately $39 billion in funding to attract companies like Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics Co. to establish advanced chip fabrication facilities within the United States. The China Semiconductor Industry Association (CSIA) criticized the act, stating that it “violates the fundamental principles of a market economy and caused profound and significant impact on the global semiconductor supply chain.”
While the Commerce Ministry’s statement didn’t specify any companies, several US firms, including Texas Instruments Inc. and Analog Devices Inc., are dominant players in the market for lower-end chips like power and analog chips. These components are essential in a wide range of modern electronics, from vehicles to household appliances. They manage power distribution and convert digital signals.
This investigation mirrors a long-standing complaint from the US regarding China’s government support for its domestic companies, which the US argues violates international trade agreements. US and European officials have also expressed concern that Chinese companies, rapidly expanding their capacity in mature chip nodes, could potentially saturate global markets with inexpensive chips.
The potential repercussions for companies found to be in breach of anti-dumping or antitrust regulations remain uncertain. Depending on the investigation’s findings, the Chinese government could levy higher tariffs, impose company-specific tariffs, or even implement product bans or substantial fines.
Previous instances of Chinese regulatory action against US tech companies include Qualcomm Inc., which modified its business practices and paid a significant fine in 2015 to resolve an antitrust case. More recently, Micron Technology Inc. faced a cybersecurity probe in 2023, and Nvidia Corp. came under investigation for potential antitrust violations related to a past acquisition in late 2024. The European Union has also considered reviewing the extent to which its businesses rely on mature chips from China, echoing US concerns about potential risks to national security and global supply chains.
China imported nearly 550 billion integrated circuit units valued at $385.6 billion in 2024, predominantly older-generation chips utilized in various products ranging from home appliances to electric vehicles. The investigation announcement follows a period of heightened US trade restrictions targeting China, including recent regulations aimed at limiting the supply of AI accelerators and the blacklisting of several Chinese companies, including a Tencent Holdings Ltd.-backed AI startup. These actions have drawn criticism from US tech companies, who argue they stifle innovation and were implemented hastily.
In conclusion, China’s investigation into US chip practices signals a significant escalation in the ongoing trade dispute between the two countries. The outcome of this investigation could have substantial implications for the global semiconductor industry and the broader US-China relationship. The investigation’s findings and subsequent actions taken by the Chinese government will be closely monitored by businesses and policymakers worldwide.
