China Retaliates Against U.S. Semiconductor Policies
China announced on Thursday that it will investigate U.S. government subsidies to the semiconductor sector, claiming they harm Chinese chipmakers that produce mature node chips—a key segment of the semiconductor industry used in home appliances, communications systems, and industrial applications.
The Chinese Ministry of Commerce accused the Biden administration’s CHIPS and Science Act of providing unfair competitive advantages to U.S. semiconductor firms, allowing them to export low-cost mature node chips to China and undermine domestic producers.
China’s commerce ministry stated:
“The Biden administration has given a large amount of subsidies to the chip industry, and U.S. enterprises have thus gained an unfair competitive advantage by exporting low-priced mature node chips to China.”
China’s Semiconductor Industry Responds
Soon after the announcement, the China Semiconductor Industry Association backed the government’s investigation, calling U.S. semiconductor policies a “serious violation of market economy principles.”
The CHIPS and Science Act, signed into law in 2022, includes $52.7 billion in subsidies for U.S. semiconductor production, research, and workforce development. Beijing argues that these subsidies create distortions in the global chip market and threaten the competitiveness of Chinese chipmakers.
Retaliation Against U.S. Trade Actions
The probe is seen as a direct response to recent U.S. policies:
- In September 2024, the Biden administration imposed higher tariffs on all Chinese semiconductor imports.
- In December 2024, the U.S. Trade Representative (USTR) launched a probe into China’s mature node chip sector, citing concerns over state-funded capacity expansion and artificially low pricing.
- Over the past three years, the U.S. has tightened export controls, restricting the sale of advanced AI chips to China.
U.S. Trade Representative Katherine Tai stated in December:
“China’s state-backed semiconductor expansion has artificially lowered prices and hurt competition.”
Potential Impact on U.S. Chipmakers
It remains unclear what retaliatory measures China may take following the investigation, but U.S. chip firms operating in China could face new restrictions. Companies like Intel (INTC.O), which sells mature node chips to Chinese manufacturers, may see their business operations disrupted.
Intel has not yet responded to requests for comment regarding the investigation.
Escalating U.S.-China Chip War
While China’s semiconductor industry lags behind the U.S. in cutting-edge AI chip production, Beijing has already taken retaliatory steps in the past:
- Restricting exports of rare earth metals, which are critical to chip manufacturing.
- Launching an anti-monopoly investigation into U.S. AI chipmaker Nvidia (NVDA.O).
What’s Next?
China’s probe into U.S. semiconductor subsidies signals an escalation in the ongoing chip war between the two nations.
With both sides imposing trade restrictions, the global semiconductor supply chain faces further disruption, raising concerns for tech firms and manufacturers worldwide.
As tensions rise, analysts will closely monitor:
- Potential Chinese sanctions on U.S. chip firms.
- Impact on semiconductor supply chains.
- Possible U.S. countermeasures in response to Beijing’s probe.
