Suddenly, the United States wants to strangle China's chips above 28nm!

Reuters reported on March 7 that the Office of the United States Trade Representative (USTR) will hold hearings on Tuesday on "traditional" semiconductors made in China, or impose more tariffs. The investigation, which began last December under Biden, aims to protect the U.S. semiconductor industry. The reaction from all walks of life is mixed, and the relevant Chinese chambers of commerce oppose the tax increase, saying that it will harm the interests of many parties in the United States.

The U.S. moved out of Section 301 of the Trade Act of 1974 (a classic tool of the trade war), accusing China of dominating the semiconductor industry through "non-market means," including:

• The government gives money, tax exemption, and low-cost land to support local enterprises;
• squeezing foreign companies with policies and demanding technology transfer;
• The mass production of mature process chips (such as above 28nm) threatens the global supply chain.

The United States intends to hold a hearing on the promotion of China's semiconductor industry and its impact analysis

As competition in the global semiconductor industry intensifies, the U.S. government's policy toward China's semiconductor industry continues to tighten. Recently, the Office of the U.S. Trade Representative (USTR) announced that it will hold a hearing on March 11, 2025, to discuss the development of the Chinese traditional semiconductor market (chips with processes above 14nm) and explore the possibility of further increasing the relevant tariffs. This move comes at a critical stage in the U.S. semiconductor manufacturing revitalization plan, and is also closely related to the long-term game of trade relations between China and the United States. This article provides an in-depth analysis of the background to the hearing, policy drivers, market implications, and possible future evolutionary trends.

The escalation of U.S. policy toward China's semiconductors

In December 2024, the U.S. government launched an investigation into China's traditional semiconductor industry under Section 301 of the Trade Act of 1974. The move is believed to be in response to China's rapid growth in chip manufacturing in recent years, particularly capacity expansion in traditional chips, i.e., semiconductors with manufacturing processes more than a decade ago.

The U.S. government is concerned that China's large-scale policy support has given its companies an unfair competitive advantage in the global market. In response, the U.S. has imposed a 50% tariff on mature semiconductor imports from China since January 1, 2025, and the hearing will further discuss whether additional sanctions are needed.

Original Reuters article:

The U.S. Trade Representative's Office will hold a hearing on Tuesday into older Chinese-made "legacy" semiconductors that could heap more U.S. tariffs on chips from China that power everyday goods from autos to washing machines to telecoms gear.

The probe, which was started under then-President Joe Biden in December, aims to protect American and other semiconductor producers from China's massive state-driven buildup of domestic chip supply. A 50% U.S. tariff on Chinese semiconductors started on Jan. 1.

Legacy chips use older manufacturing processes introduced more than a decade ago and are often far simpler than chips used in AI applications or sophisticated microprocessors.

The Commerce Department said in December that two-thirds of U.S. products using chips had Chinese legacy chips in them, and half of U.S. companies did not know the origin of their chips including some in the defense industry.

Trump called for the repeal of the CHIPS Act

The hearing comes as President Donald Trump called for the repeal of a $52.7 billion bill aimed at boosting chip manufacturing in the United States, which has been submitted to Intel (INTC.O), Samsung Electronics (005930. KS), Micron Technology (MU.O), TSMC (2330. TW) and other companies.

The investigation was conducted under Section 301 of the Trade Act of 1974, which Trump invoked in 2018 and 2019 to impose tariffs of up to 25% on about $370 billion worth of Chinese imports, triggering a nearly three-year trade war with China.

The China Association of Automobile Manufacturers (CAAM) told the USTR that it believes China's auto chip industry "is not using anti-competitive and non-market means to achieve its goals."

The Innovation Foundation plans to say that China is using the U.S. free-market system and free trade-oriented policies to "monopolize markets, weaken U.S. companies, and gain influence over critical supply chains," and will also warn about "the consequences of failing to act on China's subsidies and market-distorting practices for silicon carbide wafers."

In an opinion submitted to the Office of the United States Trade Representative, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products said the new tariffs "will lead to higher inflation in the United States and cause significant harm to American households, consumers, importers and exporters, as well as domestic businesses in the sector."