The Biden administration has launched a formal investigation into Chinese-made legacy semiconductors, citing potential risks to national security and critical infrastructure. The concerns stem from Chinese government-funded production that allows manufacturers to flood the market with prices that others can't compete with, along with ongoing security concerns and supply chain dependencies.
Legacy semiconductors, essential for industries like automotive, telecommunications, and defense, are manufactured using older production technologies. While much of the global focus has been on advanced chips for artificial intelligence, these legacy chips underpin countless everyday and industrial applications. The investigation highlights concerns over China's expanding dominance in this sector, fueled by substantial government subsidies.
According to a previous report, China has been aggressively investing in legacy chip production, using state funding to boost manufacturing capabilities through companies like SMIC (Semiconductor Manufacturing International Corporation). This has been a point of concern in the U.S. and Europe about over-reliance on Chinese technology, as these subsidies undermine global market competition.
Legacy semiconductors are particularly critical as their production has dwindled in the U.S. and Europe, with many manufacturers focusing on cutting-edge chips built for AI. This shift has left Western nations reliant on Chinese suppliers for older chips used in vehicles, medical devices, and military equipment.
The latest investigation seeks to determine whether Chinese-made chips pose espionage risks or could be used to disrupt supply chains, aligning with broader U.S. efforts to safeguard its semiconductor industry under the CHIPS and Science Act.
China’s subsidies have drawn criticism for exacerbating global supply chain dependencies and undermining competition. These subsidies not only enable Chinese manufacturers to dominate the legacy chip market but also limit opportunities for non-Chinese producers. This could potentially lead to supply chain vulnerabilities, particularly during geopolitical tensions.
The U.S. Commerce Department’s investigation could lead to new restrictions, including tariffs, tighter export controls, or outright bans on specific imports. However, transitioning away from Chinese suppliers may be costly and time-consuming, given the legacy chip market's global integration.
