The spokesperson of the Ministry of Commerce of China said on the 23rd that on December 23rd, US time, the Office of the US Trade Representative announced the launch of a 301 investigation against China's chip industry-related policies. 

China is strongly dissatisfied with this and firmly opposes it. The spokesperson said that the US 301 investigation has obvious unilateral and protectionist colors. Previously, the US 301 tariffs on China have been ruled by the WTO to violate WTO rules and have been opposed by many WTO members. China has made solemn representations to the US many times. The US has launched a new 301 investigation on China's chip industry-related policies out of suppression of China and domestic political needs. This will disrupt and distort the global chip industry chain supply chain, and will also harm the interests of American companies and consumers. 

It is a mistake again and again. The spokesperson pointed out that the US has provided huge subsidies to its chip industry through the Chips and Science Act. US companies occupy nearly half of the global chip market, but they accuse China of so-called "non-market practices" and exaggerate the threat of China's industry. This is obviously self-contradictory and completely untenable. The mature process chip report released by the US Department of Commerce not long ago shows that Chinese-made chips only account for 1.3% of the US market share. China's chip exports to the United States are far lower than its imports from the United States. China urges the United States to respect facts and multilateral rules and immediately stop its wrong practices. China will closely follow the progress of the investigation and will take all necessary measures to resolutely defend its own rights and interests.

U.S. targets China's production of key computer chips

The Biden administration on Monday launched a trade investigation into older Chinese-made computer chips that are integral to cars, dishwashers, telecommunications networks and military weapons.

The investigation could lead to tariffs or other measures to block Chinese chips from entering the U.S. market, but the incoming Trump administration will decide which way to go.

In industry after industry, from steel and ships to solar panels and electric cars, China has invested heavily in world-class manufacturing facilities, churning out low-cost products that have flooded global markets. American companies and those in many other countries have found themselves unable to compete and have gone out of business, leaving Chinese companies largely in control of the global market.

U.S. officials have been concerned that the semiconductor industry could be next. 

Chinese companies have been ramping up chip production, especially of older semiconductors that still power a wide range of machinery and appliances. China is building more new semiconductor factories than any other country, a development that U.S. officials see as threatening the survival of chip factories in Europe and the United States.

U.S. Trade Representative Katherine Tai said in a phone call on Sunday that China's policies have enabled domestic companies to expand rapidly and "artificially provide low-priced chips that could severely undermine, and possibly eliminate, market-oriented competition at home."

She said this would make supply chains "more vulnerable, and supply chain bottlenecks could be used to economically coerce other countries."

Such investigations allow the U.S. government to take a range of actions to address discriminatory practices by foreign governments that burden U.S. commerce. The investigation will be conducted by the Office of the U.S. Trade Representative under Section 301 of the Trade Act of 1974. Experts say investigations typically take six months to a year to conclude.

Tensions between the U.S. and China have risen during the Biden administration as the U.S. has restricted exports of advanced technology to China over national security concerns. China has fought back by restricting exports of minerals used to make cars, semiconductors and weapons.

A spokesman for China's Ministry of Commerce said in a statement that China "strongly condemns and firmly opposes" the investigation and will "take all necessary measures to resolutely defend its own rights and interests."

The Ministry of Industry and Information Technology said the United States has provided huge subsidies to its chip industry and that China's chip exports to the United States are far lower than its imports from the United States.

"This is obviously contradictory," the statement said.

The Biden administration has introduced a series of export control measures in recent years to try to curb China's ability to make the most advanced computer chips, believing that the technology could help Beijing develop artificial intelligence.

But the Biden administration hasn't done much to crack down on older Chinese-made chips, sometimes called "legacy chips." The Chinese government and Chinese companies have invested heavily in making these chips, which remain essential to the modern economy.

China doesn't yet dominate global chip production, but its market share is growing fast. The U.S. government estimates that by 2032, China could account for more than 40% of the world's basic chip production capacity, and in some areas, more than half of global capacity.

A memo written by the U.S. Department of Commerce and sent to other government agencies in November and viewed by The New York Times said that by 2030, China will dominate the supply chain for legacy chips. The Commerce Department said this could pose serious risks to U.S. national security, such as weakening the U.S. industrial base, creating supply chain bottlenecks and leading to potential cyber threats.

The memo also said that China's chip expansion poses a threat to new chip facilities that the U.S. government is investing in. The U.S. Commerce Department has signed contracts to invest tens of billions of dollars in U.S. chip manufacturing facilities, including more than $4 billion in legacy chip production, using funds from the 2022 CHIPS Act.

The Commerce Department memo said that modeling by the department's chip program office showed that new Chinese capacity could mean that factories in the United States and allies would eventually produce fewer chips than they need to be economically viable.

"We are seeing a reluctance among chip companies to invest in the United States in the face of these trends," Commerce Secretary Gina M. Raimondo said on a conference call Sunday.

According to government investigations, Chinese suppliers offer chips at prices 30% to 50% lower than American suppliers, and sometimes below production costs, the memo said.

Matt Turpin, a former Trump administration official and senior adviser to Palantir Technologies, said China's chip production threatens revenues for American companies and therefore billions of dollars in U.S. government investments in new factories.

"It makes the entire CHIPS bill incomplete," Mr. Turpin said.

In Taiwan, the world's semiconductor capital, China's plans are also raising alarm bells. "Everyone thinks China's market practices are unfair," Wu Zhengwen, chairman of Taiwan's National Science and Technology Council, said at a press conference in December.

Semiconductor expert Wu Xiaohui said China's low production prices will attract chip designers, who in turn will teach Chinese factories how to produce higher-quality chips in a more efficient way.

"This is a very important technology leak," he said.

If China can build up a lot of expertise in making advanced chips, it can also "gain more and more influence" to counter the United States, said Zhang Zhiqiang, director of the Taiwan Center for Social and Emerging Technology Research. "By disrupting the supply chain, China can impose sanctions on the United States and its allies, and eventually turn the tide of the chip war," he added.

The Biden administration has been considering taking action on traditional chips for several years. In recent months, the government has been weighing whether to investigate under Section 301, which focuses on unfair trade practices, or Section 232, a law related to national security threats that is enforced by the Commerce Department.

The trade investigation is unlikely to anger allies and may also provoke China to retaliate with national security-related measures, people familiar with the matter said.

Some officials expressed frustration that the investigation didn't begin sooner and said the final decision on how to handle the findings will fall to President-elect Donald J. Trump.

Many of Trump's advisers appear to agree on the challenges posed by traditional Chinese chip production, but some in the administration and the chip industry have speculated that Trump may view tariffs as leverage in trade negotiations, a tactic he frequently used during his first term.

Industry groups urged the administration to proceed with caution. Jason Oxman, president of the Information Technology Industry Council, said in a statement that it is "critical that the administration conduct a thorough investigation and not prejudge the results."

He called the timing of the investigation "concerning" and said "we strongly urge officials in both the current and incoming administrations to conduct their investigations in an objective and cooperative manner."

Source: Content compiled from NYT

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