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The Biden administration announced a Section 301 investigation Monday targeting China’s semiconductor industry, alleging Beijing’s unfair trade practices have created global dependencies and harmed competition in the microchip market. This marks the latest move in a series of U.S. efforts to curb China’s growing influence in the technology sector.

Focus on Legacy Chips

The probe zeroes in on China’s production of legacy chips—semiconductors used in a wide range of products, from vehicles and household appliances to telecom equipment. The White House asserts that China employs non-market practices, including subsidies and state coordination, to dominate the semiconductor sector, which poses risks to global supply chain stability.

“China routinely engages in non-market policies and practices that enable [its] companies to significantly harm competition and create dangerous supply chain dependencies in foundational semiconductors,” the White House said in a statement.

Potential Sanctions and Timelines

Launched under Section 301 of the Trade Act of 1974, the investigation could lead to new tariffs or penalties, though any concrete action will take time. Section 301 probes typically last 12 to 18 months and require public consultations before sanctions are imposed.

President Joe Biden has already implemented export controls on semiconductor technology and announced a tariff increase on Chinese chips set to take effect Jan. 1. Additional penalties could emerge as the investigation progresses.

“This investigation underscores the Biden-Harris Administration's commitment to standing up for American workers and businesses, increasing the resilience of critical supply chains, and supporting the unparalleled investment being made in this industry,” U.S. Trade Representative Katherine Tai said.

Accusations Against China

The Federal Register notice initiating the probe cites evidence of Chinese policies such as opaque regulations, wage suppression, massive subsidies, and intellectual property theft to manipulate the semiconductor market. It also highlights risks posed by overconcentration of production in China, potentially affecting industries reliant on downstream chip-powered products like defense systems, cars, and medical devices.

China's Response

China’s Ministry of Commerce condemned the investigation as protectionist and hypocritical, pointing to the U.S.’s own tech sector support through the CHIPS Act.

“China urges the United States to respect the facts and multilateral rules and immediately stop the wrongdoing,” the ministry said in a statement. “China will pay close attention to the progress of the investigation and will take all necessary measures to resolutely defend its rights and interests.”

Implications for Global Trade

The investigation marks the latest chapter in ongoing tensions between the U.S. and China over technology and trade. While former President Donald Trump implemented sweeping tariffs on Chinese goods under the same legal authority, Biden’s probe suggests a more targeted approach aimed at bolstering domestic semiconductor manufacturing while addressing supply chain vulnerabilities.