US Begins Investigation Into Legacy Chinese Chips

The Biden Administration has launched a last-minute investigation into older Chinese-made legacy semiconductors – weeks before Donald Trump’s administration takes over.

The US Trade Representative’s office announced on Monday “the initiation of an investigation regarding China’s acts, policies, and practices related to targeting of the semiconductor industry for dominance. The investigation will be conducted under Section 301 of the Trade Act of 1974, as amended.”

The United States and China are currently engaged in a trade war that shows no sign of slowing, as President-elect Donald Trump has threatened to sharply raise tariffs on imports from China and other countries.

Trade war

The trade war between Washington and Beijing sharply intensified in 2024.

The Biden Administration and the US Commerce Department had in May 2024 announced new tariffs of up to 100 percent on a number of Chinese goods, including electric vehicles (EVs), which they said were designed “to protect American workers and businesses from China’s unfair trade practices.”

US tariffs were also slapped on Chinese steel and aluminium; semiconductors; electric vehicles; batteries and battery components; solar cells; ship-to-shore cranes; and certain medical products.

Then in early December 2024, the US Commerce Department introduced a fresh round of trade restrictions, designed to hamper Beijing’s capacity to produce high-end chips.

The punishing US restrictions included adding 140 companies to the US ‘Entity List’; as well as new export controls on 24 types of manufacturing equipment; restrictions on three types of software tools used for developing semiconductors; and high-bandwidth memory chips.

Soon after Beijing responded by banning the export to the United States of certain high-tech materials (gallium, germanium, antimony and other key high-tech materials), which it claimed had potential military applications.

And four of China’s top industry associations issued a co-ordinated warning to Chinese companies to avoid buying US chips as they were “no longer safe, no longer reliable” and to buy domestic products instead.

US-based Micron had faced a similar Chinese ‘national security’ ban in May 2023.

The US then responded by raising the tariffs on Chinese Solar Wafers, Polysilicon, and Tungsten.

Meanwhile China’s antitrust regulator opened an investigation into Nvidia over concerns related to its $7 billion (£5.5bn) acquisition of Israel’s Mellanox Technologies in 2019.

Legacy chip probe

Now amid the escalating trade war, the United States has launched a new probe into legacy Chinese semiconductors that can be found in everything from cars to household appliances, medical systems, telecommunications, power generation, and defence systems.

That US stated that “evidence indicates that China seeks to dominate domestic and global markets in the semiconductor industry and undertakes extensive anticompetitive and non-market means, including setting and pursuing market share targets, to achieve indigenisation and self-sufficiency.”

“China’s acts, policies, and practices appear to have and to threaten detrimental impacts on the United States and other economies, undermining the competitiveness of American industry and workers, critical US supply chains, and US economic security,” it added.

“This investigation underscores the Biden-Harris Administration’s commitment to standing up for American workers and businesses, increasing the resilience of critical supply chains, and supporting the unparalleled investment being made in this industry,” said Ambassador Katherine Tai.

The US investigation will also initially assess whether the impact of China’s acts, policies, and practices on the production of silicon carbide substrates (or other wafers used as inputs into semiconductor fabrication) contributes to any unreasonableness or discrimination or burden or restriction on US Commerce.

This investigation marks a notable change in the United States seeking to only restrict China’s access and manufacturing of cutting-edge and AI-focused processors.

Legacy chips are produced with less advanced manufacturing techniques, and this latest investigation into Chinese legacy chips conducted under the Trade Act of 1974, could result in the imposition of remedies such as stiff tariffs on the products in question.