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The Biden administration has announced an investigation into China’s semiconductor industry.

What’s the deal: In an announcement, the Biden administration revealed a Section 301 trade investigation into China’s semiconductor industry, led by the Office of the United States Trade Representative. The investigation will examine China’s industrial policies and practices related to semiconductor production, focusing specifically on legacy chips and critical components like silicon carbide substrates used in fabrication. It aims to determine whether China’s state subsidies and other nonmarket practices unfairly disadvantage US industries and create supply chain dependencies that China could weaponize.

The investigation could lead to a range of actions, including the imposition of tariffs, trade restrictions, or other measures designed to counteract China. US officials anticipate that the investigation will take six months to a year, with its findings potentially influencing US trade policy.

Digging deeper: While China does not yet dominate global chip production, its market share is growing quickly, with projections indicating that it could control over 40% of global capacity for foundational chips by 2032. In addition, the Chinese government has invested hundreds of billions of dollars to boost its chip production, similar to the United States.

White House comments: In a statement, the White House said, “President Biden recognizes the benefits for our workers and businesses from strong alliances and a rules-based international trade system based on fair competition.  The Biden-Harris Administration will continue to collaborate with allies and partners on this critical issue in the coming days and weeks.”

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