US Government Takes Aim at Chinese-Made Legacy Chips: Tariffs on Radar

The U.S. government is set to launch a plan to push out Chinese-made legacy chips from the domestic market. The move is expected to involve imposing tariffs after assessing the situation to counter the low-cost offensive by Chinese semiconductor companies, which are backed by domestic subsidies. Legacy chips, also known as old or generic semiconductors, refer to 28-nanometer (billionth of a meter) semiconductors.

The U.S. Department of Commerce announced on the 21st (local time) that it will investigate the procurement status of legacy chips by U.S. companies starting from January.

The investigation will target 100 U.S. companies in the automotive, aviation, defense, and other sectors. The inquiry will focus on using and procuring Chinese-made legacy chips in the significant industrial supply chains of the U.S. Legacy chips are widely used not only on commercial applications such as cars and mobile phones but also on electronic applications.

The Commerce Department explained that this investigation assesses the impact of Chinese semiconductors on the U.S. semiconductor supply chain and the defense industry. It also expressed hope that this investigation will help promote fair competition in the production of legacy chips and reduce the national security risk posed by China.

The U.S. government contends that the global semiconductor competition is currently skewed in China’s favor due to substantial subsidies provided by the Chinese government to its domestic semiconductor industry. A report from the Commerce Department reveals that China has injected approximately $150 billion (equivalent to roughly 195 trillion won) in subsidies into its domestic semiconductor sector over the last ten years.

The Commerce Department pointed out that the cost of semiconductor manufacturing in the U.S. can be 30-45% higher than in other countries and called for long-term government-level support for the construction of fabs (semiconductor fabrication plants) in the country.

U.S. Commerce Secretary Gina Raimondo expressed concerns about practices observed in recent years. China has reportedly motivated companies to boost production of legacy chips, thereby intensifying competition challenges for U.S. firms. She emphasized the importance of addressing these non-market actions by foreign governments, highlighting their potential threat to the U.S. legacy chip supply chain as a national security issue.

Once the investigation is concluded, U.S. authorities are expected to raise barriers to the entry of Chinese products into the U.S., imposing tariffs. An anonymous source told Bloomberg that the Commerce Department’s measures could include imposing tariffs on the Chinese semiconductor industry. The U.S. House China Special Committee recently issued a bipartisan report urging the Biden administration to impose tariffs on legacy chips.

By. Ju Hae Yoon