The United States’ initiation of a Section 301 investigation into Chinese chips may end up being a self-inflicted blow. The US government has invoked Section 301 of the Trade Act to launch an investigation into mature-process semiconductors produced in China. The US side claims that it wants to protect American workers and businesses and investigate non-market behaviors in China’s semiconductor industry and the degree to which related products are incorporated into key industries. China strongly resents and firmly opposes this move, pointing out that Section 301 has unilateral and protectionist characteristics. Chips are not the first industry to be investigated under Section 301. Previously, industries such as steel, aluminum, and photovoltaic had also been investigated.
After Joe Biden took office, he took two major actions to curb the development of China’s chip industry. First, he proposed the “Chip 4 Alliance” in an attempt to exclude the Chinese mainland from the global semiconductor supply chain alliance. Second, he enacted the “CHIPS and Science Act” to promote domestic chip manufacturing in the United States and restrict the transfer of technology to China. The US Secretary of Commerce has stated that the United States wants to be the only country with the ability to produce cutting-edge chips and have important R&D bases and mass manufacturing operations for enterprises. The ban on Chinese chips has been continuously upgraded, and this Section 301 investigation extends the containment strategy from high-end chips to the field of basic and traditional chips.
The Biden administration has launched an investigation into China’s basic chip products on the grounds of security threats. However, US companies account for nearly half of the global chip market share but accuse China of non-market practices, which is self-contradictory. Moreover, Chinese-made chips only account for 1.3% of the US market share. This is more like the United States being afraid of the development of China’s chip industry. After China’s steel, aluminum, and photovoltaic products were investigated under Section 301, this investigation seems to be a reverse certification of the threat posed by Chinese products. In recent years, China’s chip industry has developed rapidly, increasing investment in mature-process chip manufacturing. Output has soared, and China is expected to become the global leader in the mature-process chip manufacturing industry. China is the world’s largest exporter of chips, and chip production is growing rapidly. It also has an advantage in chip materials. China’s rare earth production and processing capacity accounts for more than half of the global total.
The Section 301 investigation may provide a channel for Trump to impose tariffs on Chinese imported products. Biden has already implemented a 50% tariff and stricter export controls on Chinese semiconductor products. However, high tariffs imposed by the US have limited impact on relevant Chinese enterprises, while the costs are borne by American enterprises and consumers. Moreover, “low-end” or “mature-process” chips are important for downstream products, and switching to other suppliers is costly. For China, sanctions and blockades mean forced progress. China’s chip industry has a “bottleneck” problem. Under high pressure, creativity will be stimulated. If the United States continues to impose controls, Chinese enterprises and capital will increase investment and accelerate the pace of achieving independent control. The US Secretary of Commerce has also said that blocking China in the chip competition is ineffective, and federal government funding support for domestic innovation in the United States is more important.
