Industry News

Chinese Semiconductors Under 301 Investigation

Jan. 14, 2025
By: Chaney A. Finn


Semiconductors have been at the top of the list of commodities requiring supply chain security, starting with the global shortage experienced during the COVID-19 pandemic. Their use in most electronics for consumer and military applications pose economic and national security implications. The U.S. Federal Government is seeking to bolster the U.S. semiconductor industry in attempt to create a stable and secure supply chain for U.S.-made semiconductors through its own sourcing practices.

This comes as Chinese semiconductors are now subject to a Section 301 investigation in response to Chinas’ global market dominance. In the investigation anticompetitive practices by the Chinese have been alleged. According to the U.S. Trade Representative (USTR), the investigation will initially focus on legacy semiconductor manufacturing “including to the extent that they are incorporated as components into downstream products for critical industries like defense, automotive, medical devices, aerospace, telecommunications, and power generation and the electrical grid.”

The USTR noted that China has nearly doubled its global share of foundational logic semiconductor production capacity in the last six years, and based on announced new fabrication plants, China is expected to make half the world's capacity of this kind of chip by 2029.

Chinese officials objected to the investigation, citing the WTO’s 2020 panel finding that Section 301 tariffs imposed during the Trump administration violated WTO rules. This recent investigation launched under the Biden administration did not mention the WTO panel determination. Chinese officials also countered that the U.S. subsidizes its own semiconductor production through the CHIPS and Science Act, while Chinese chips only make up 1.3% of the U.S. market. Chinese officials are calling the investigation protectionary and being used to harm China economically for political reasons.  

However, the Bureau of Industry and Security published a report detailing that critical industries are over-dependent on Chinese chips, citing that 44% of companies do not know where their chips come from, and for the 38% that did know their products included Chinese legacy chips, more than two-thirds of their products contained Chinese chips.

The docket for comments is open from January 6th through February 5th. Public hearings are scheduled for March 11th and 12th.

Should you have any questions pertaining to semiconductor trade, Section 301 investigations, or any other trade-related questions, do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.