china launches investigation into us chip subsidies amid trade conflict
Beijing, Friday, 17 January 2025.
China has started an investigation into US subsidies provided to its semiconductor industry under the ‘CHIPS and Science Act’. This action happens amid increasing trade tensions between China and Western nations, which could have an impact on the global semiconductor supply chains. The investigation was announced after the Chinese Ministry of Commerce cited unfair competition from US companies benefiting from these subsidies. The tension between the two economic powers is rooted in concerns that such subsidies give American firms an unwarranted advantage. The ongoing trade war could further impact major companies, like Intel, involved in the sale of mature node chips to China. The situation is part of broader retaliatory measures announced in response to US-imposed restrictions on Chinese semiconductor technology. Both regions are actively engaging in measures that could reshape global market dynamics, potentially affecting various sectors worldwide.
Investigation details and market impact
The Chinese Ministry of Commerce announced on January 16, 2025, that it will investigate US semiconductor subsidies, particularly focusing on mature node chips [1]. The investigation targets the $52.7 billion subsidy package provided under the CHIPS and Science Act [1]. This move has created uncertainty for major US chipmakers, with companies like Intel, which sells mature process chips to China, potentially facing significant market impacts [1]. The semiconductor industry association in China has expressed strong support for this investigation [1].
Trade tension escalation
The investigation represents the latest development in an escalating trade conflict between the US and China [1]. Chinese officials claim US companies have gained unfair competitive advantages through government subsidies and are selling mature process chips to China at artificially low prices [3][4]. This follows recent US actions, including increased tariffs on Chinese chip imports and the launch of a trade investigation into Chinese mature node chips in December 2024 [1].
Market implications and industry response
The investigation has heightened concerns about global semiconductor supply chain stability [1]. The Chinese semiconductor industry association argues that the US CHIPS Act’s subsidies severely violate market economy principles [1]. While China’s semiconductor industry generally lags behind the US [1], Beijing has been implementing retaliatory measures, including restrictions on rare earth metal exports and antitrust investigations into US AI chip companies like Nvidia [1].
Global trade impact
This development occurs amid broader trade tensions affecting multiple sectors. China’s trade surplus reached a record high of approximately one trillion dollars in 2024, with one-third coming from trade with the US [1]. The investigation follows a pattern of increased trade restrictions from both sides, including recent US actions to tighten export controls on advanced AI chips to China [5].