USTR Targets Chinese Foundational Chips & Substrates

The Office of the U.S. Trade Representative is launching a Section 301 investigation to examine the PRC’s targeting of foundational semiconductors (also known as legacy or mature node chips) for dominance and the impact on the U.S. economy.

In addition, the investigation will initially assess the impact of the PRC’s acts, policies, and practices on the production of silicon carbide substrates or other wafers used as inputs into semiconductor fabrication.

PRC semiconductors often enter the U.S. market as a component of finished goods. This Section 301 investigation will examine a broad range of the PRC’s non-market acts, policies, and practices with respect to the semiconductor sector, including to the extent these semiconductors 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 investigation will be conducted under Section 301 of the Trade Act of 1974, as amended.

The USTR announcement claims  "China seeks to dominate domestic and global markets in the semiconductor industry and undertakes extensive anticompetitive and non-market means, including setting and pursuing market share targets, to achieve indigenization and self-sufficiency."

The investigation will initially focus on China’s manufacturing of foundational semiconductors (also known as legacy or mature node semiconductors), 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 investigation will also initially assess whether the impact of China’s acts, policies, and practices on the production of silicon carbide substrates (or other wafers used as inputs into semiconductor fabrication) contributes to any unreasonableness or discrimination or burden or restriction on U.S. commerce.

As explained in a formal notice, USTR will be seeking public comments and will hold a public hearing in connection with this investigation. A docket for comments regarding the investigation will open on January 6, 2025.

USTR Notice: formal notice

Background 

Section 301 of the Trade Act of 1974, as amended, (Trade Act) is designed to address unfair foreign practices affecting U.S. commerce. Section 301(b) may be used to respond to unreasonable or discriminatory foreign government practices that burden or restrict U.S. commerce. Under Section 302(b) of the Trade Act, the U.S. Trade Representative may self-initiate an investigation under Section 301. 
 
The U.S. Trade Representative must seek consultations with the foreign government whose acts, policies, or practices are under investigation. USTR has requested consultations with China in connection with the investigation. 

Initiation of Section 301 Investigation: