Washington is preparing to target another segment of the Chinese chips industry. The Biden administration, with just weeks left in its term, is preparing an investigation into Chinese-made legacy chips that could ultimately end in tariffs or import bans, reports the New York Times, citing government documents and unnamed sources.
The administration could kick off the investigation in the coming weeks, yet would take at least six months to conclude. That means any policy decisions–tariffs, import bans or some other measure–will fall to the incoming Trump administration, which takes over in January.
While Washington has focused primarily on exports of advanced chips and chipmaking to China, the reported investigation, if it happens, suggests the U.S. may now be turning its attention to less cutting-edge parts of the industry as well.
The U.S. imposed export controls on the sale of advanced semiconductors to China in 2022, and have steadily expanded its rules since then. Washington is also trying to cut off China’s access to the high-end machines needed to make these cutting-edge chips.
In May, the Biden administration announced that it would raise tariffs on legacy semiconductors from China, starting next year.
Many consumer electronics and durable goods, like televisions, refrigerators, washing machines and even cars, use so-called legacy chips. China is poised to dominate the market for these less sophisticated semiconductors.
U.S. officials fear Chinese legacy chips could pose a national security threat. In April, Commerce Secretary Gina Raimondo warned that 60% of new legacy chips entering the market will come from China.
According to analysts, China has invested in the legacy chip sector in order to supply its own chip-hungry industry, like electric vehicles and renewable energy. Chinese companies are already able to compete with non-Chinese manufacturers in terms of price, even if they still lag on technological sophistication.
A flood of legacy chips into the market could depress prices in an already-battered part of the market. That will put pressure on the bottom lines of non-Chinese semiconductor manufacturers; U.S. dependence on Chinese legacy chip manufacturing will increase if non-Chinese competitors go out of business.
Still, imposing tariffs on legacy chips could prove challenging. Taxing finished products that use Chinese chips will raise prices for consumers across the boards, given that legacy chips are found in many electronic items. Yet taxing just Chinese semiconductors alone will require the U.S. to examine individual components in finished products, complicated when done at scale.
