China strikes back: US chipmakers will be checked for dumping and unfair subsidies

China will investigate reports that the United States artificially lowers prices for entry-level chips and unfairly subsidizes its chipmakers. As Bloomberg noted, this could be one of Beijing’s most decisive steps in response to American technology sanctions.

Image source: NVIDIA

The Chinese government will review whether the United States is giving its chipmakers an unfair advantage through incentives and grants or illegally driving down prices for Chinese products, China’s Ministry of Commerce said in a statement on Thursday. The investigation was launched following protests from local industry representatives, the ministry said.

The department has received complaints from Chinese chipmakers about the US Chips and Science Act, which provides about $39 billion in funds to, among other things, encourage companies such as Taiwan Semiconductor Manufacturing and Samsung Electronics to build high-performance chip manufacturing facilities in America.

«The US Chip and Science Act violates the fundamental principles of a market economy and has had a profound and significant impact on the global semiconductor supply chain,” the China Semiconductor Industry Association (CSIA) said in a statement posted on WeChat.

Beijing’s investigation echoes longstanding U.S. accusations against China that the Chinese government is openly funding its companies in violation of global trade agreements. U.S. and European officials also warned of the risk that Chinese companies, which are rapidly expanding capacity, could end up flooding global markets with cheap chips.

A few days earlier, the Biden administration imposed new restrictions on the supply of AI accelerators to China. Nvidia and other U.S. tech companies have criticized the new rules, arguing they primarily harm American innovation and were rushed into place in the final days of the outgoing administration.

Also, the US authorities added a number of other key Chinese players to the blacklist of companies that pose a threat to national security, including the leading Chinese AI startup Zhipu, supported by Tencent Holdings, and a number of affiliated structures that have achieved success in developing the “Chinese ChatGPT”. In addition to Tencent, Zhipu’s investors include government pension fund National Social Security Fund, Alibaba Cloud, HongShan and Hillhouse venture funds, and Saudi Arabia’s P7 fund.