China Begins Probe Into US Chip Grants, Alleged Dumping

(Bloomberg) — China will start an investigation into whether the US dumps lower-end chips and unfairly subsidizes its own chipmakers, one of Beijing’s strongest retaliatory moves so far against American technology sanctions.

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The government will look into whether the US is giving its chipmakers an unfair advantage through incentives and grants, or illegally undercutting Chinese products, the Commerce Ministry said in a statement Thursday. The probe was begun in response to protests from local industry players, the agency said.

The ministry didn’t name any company, but several US firms including Texas Instruments Inc. and Analog Devices Inc. rank among the leaders in lower-end products such as power and analog chips. Those are ubiquitous in modern devices from cars to appliances, helping regulate power flows or translate digital signals.

Beijing’s investigation echoes a longstanding US complaint, that China’s government openly bankrolls its domestic firms in contravention of global trade agreements. US and European officials have also warned of the risk that Chinese companies, which’re building capacity in mature nodes at a rapid clip, could eventually flood global markets with cheap chips.

Chinese chipmakers have previously complained about the US Chips Act, which provides funding of some $39 billion to entice firms to build high-end chipmaking capacity in America.

In May, Semiconductor Manufacturing International Corp. — China’s largest chipmaker — warned that prices are set to fall as chipmakers increase capacity, raising the alarm about growing price competition globally.

The European Union was at one point considering a formal review of how widely its businesses use mature or lower-end chips from China, joining the US in flagging a potential risk to national security and global supply chains.

Beijing’s announcement on Thursday follows an unusually intense month for US trade sanctions against its geopolitical rival.

Just this week, the Biden administration unfurled regulations intended to curb the supply of AI accelerators to China. Nvidia Corp. and other tech firms have protested the regulations, saying they hurt American innovation and were rushed into being in the final days of the departing administration.

Washington also added a number of key Chinese players to a trade-restrictions blacklist intended to curtail the sale of American technology. Those included Tencent Holdings Ltd.-backed startup Zhipu, one of a handful of fledgling firms considered frontrunners in the race to develop an answer to OpenAI’s ChatGPT.

–With assistance from Vlad Savov.

(Updates with market context from the third paragraph.)