The U.S. is investigating China’s foundational chip industry

The Biden administration has launched an investigation into China’s alleged “anticompetitive and non-market” chip industry practices as it prepares to pass power to President-elect Donald Trump.

The investigation is initially focused on Chinese-made foundational chips – also called legacy or mature node semiconductors, according to the Office of the U.S. Trade Representative (USTR).

Legacy chips are critical for many industries including autos, defense, and telecommunications, but are not as advanced as semiconductors needed to develop artificial intelligence. A U.S. Department of Commerce report earlier this month found that more than two-thirds of U.S. companies’ products use Chinese-made chips.

China allegedly “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 indigenization and self-sufficiency,” the Biden administration said. The probe will be carried out under Section 301 of the Trade Act of 1974.

The Biden administration also alleges “acts, policies, and practices” by China’s chip industry “appear to have and to threaten detrimental impacts” on the U.S. and other economies, undermining U.S. competitiveness, supply chains, and economic security.

“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,” U.S. Trade Representative Katherine Tai said in a statement.

The USTR is seeking public comments on the investigation, and will hold a public hearing on it.

Earlier this month, the Biden administration introduced more restrictions on the sale of high-bandwidth memory and chipmaking tools to China, including tools produced by U.S. companies abroad.

The new rules include controls on 24 types of semiconductor manufacturing equipment, as well as on three types of software tools that can be used to develop or produce chips, the Commerce Department’s Bureau of Industry and Security (BIS) said. Another 140 unnamed Chinese entities — including semiconductor fabs, tool companies, and investment firms — accused of working on behalf of the Chinese government were also added to the U.S. trade blacklist.