In a significant step, the Biden administration on Monday announced the initiation of an investigation into China’s legacy semiconductor industry. This probe is poised to scrutinize the production and impact of various chips that are crucial for an array of applications, ranging from automobiles to defense systems. The need for this investigation arises from concerns over China’s non-market policies that allegedly compromise fair competition and create alarming supply chain dependencies in sectors foundational to both the economy and national security.
Reasons Behind U.S. Concerns
The White House’s statement underlined China’s continuous manipulation of its semiconductor industry, pointing to policies that not only disadvantage American firms but also pose risks to U.S. technological independence. China’s approach involves industrial targeting, which, according to officials, allows local manufacturers to gain an unfair edge. The ongoing Section 301 investigation will focus specifically on China’s production processes related to silicon carbide substrates and other essential wafers pivotal to chip fabrication. This examination is critical as it highlights the extent to which the U.S. is reliant on Chinese legacy chip production, which historically has not met the cutting-edge standards of companies like TSMC.
Legacy semiconductor chips may not be at the forefront of current technology debates, but their importance cannot be overstated. Although these chips are manufactured using older techniques, they remain essential for countless devices and systems. The inquiry into these semiconductors underscores a broader concern regarding technological dependency and the potential vulnerabilities it introduces, especially in sectors such as telecommunications and critical infrastructure like the electrical grid. While China’s capability to produce advanced chips lags behind its competitors, its dominance in legacy chip production enables it to maintain a substantial foothold in the semiconductor market.
Trade Act Implications
Conducted under the Trade Act of 1974, this investigation holds the potential for imposing tariffs on Chinese semiconductor exports if deemed necessary. By examining policies and practices that compromise fair trade, the Biden administration aims to recalibrate the balance in international trade dynamics, particularly in technology. The implications of this investigation could extend far beyond immediate tariffs, influencing long-term trade relationships and technological strategies between the U.S. and China.
As the Biden administration intensifies scrutiny on China’s tech sector, it raises questions regarding how these actions may be carried forward under potential future administration changes. With the deadline for U.S. elections nearing, there is speculation that findings from this probe may soon fall into the hands of Donald Trump, should he reclaim the presidency. This situation presents a complex landscape of policy continuity and shifts in technological approaches to trade with China, making it a critical area for observers and stakeholders alike.
The Biden administration’s latest investigation into legacy semiconductors reflects a heightened awareness of the geopolitical stakes involved in the semiconductor supply chain. As the global technology race accelerates, the outcomes of such probes could reshape not only U.S.-China relations but also the broader technological landscape for years to come.