The recent announcement from the U.S. Trade Representative (USTR) of a Section 301 investigation targeting China's semiconductor industry has ignited fierce backlash from Chinese officials and industry representatives. This announcement follows the U.S.'s increasing restrictions on semiconductor exports to China, igniting concerns over the future of U.S.-China cooperation within the technology sector.
At a press conference, Sun Xiao, spokesperson for the China Council for the Promotion of International Trade (CCPIT), emphasized, "The U.S. has intensified export restrictions on semiconductor products to China, including the continued addition of Chinese enterprises to export control lists. These actions have severely impacted China-U.S. semiconductor cooperation, extending their effects to industries such as automotive and telecommunications." The CCPIT regards the investigation as trade protectionism, which it believes violates World Trade Organization (WTO) rules.
The WTO has previously ruled against U.S. Section 301 tariffs, deeming them non-compliant with international trade standards. According to Sun, the U.S. is not only hindering semiconductor collaboration but simultaneously subsidizing its own semiconductor industry to maintain its dominance. He remarked, "While obstructing and restricting semiconductor cooperation with China, the U.S. provides subsidies to its own semiconductor industry to secure a dominant position in the global market. This undermines the principles of fair competition, destabilizes the global semiconductor industrial and supply chains, and hinders the progress of the new round of global sci-tech revolution and industrial transformation."
The Chinese Ministry of Commerce (MOFCOM) has also condemned the USTR's decision, characterizing it as unilateral and emphasizing the nation's intention to vigorously defend its interests. A MOFCOM spokesperson echoed similar sentiments, stating, "The Section 301 tariffs have been deemed in violation of WTO regulations and faced opposition from numerous WTO members." They have urged the U.S. to showcase good-faith efforts to promote industrial cooperation through constructive dialogue.
Compounding these tensions, reports indicate the U.S. initiated additional controls aimed at restricting exports to 140 Chinese chip firms, heightening scrutiny surrounding semiconductors and related technologies. MOFCOM's response reflects China's increasing dissatisfaction with U.S. regulatory measures which they perceive as escalatory and hypocritical.
Adding to this atmosphere of uncertainty within the semiconductor sector is the recent investigation of Nvidia by China's State Administration for Market Regulation (SAMR). Nvidia shares plummeted after the announcement of the probe, investigating the chipmaker’s acquisition of Mellanox, which was previously approved. The SAMR aims to determine whether Nvidia violated acquisition conditions initially agreed upon during the purchase.
The investigation adds yet another layer of complexity to Nvidia's business, which is already under scrutiny from American and European regulators. Shares dropped over 3% following the SAMR’s announcement. Notably, the SAMR stated, "Due to Nvidia's suspected violation of China's anti-monopoly law and the State Administration for Market Regulation's restrictive conditions around Nvidia's acquisition of Mellanox shares, the State Administration for Market Regulation is opening a probe..."
This backlash from Chinese regulators follows the Biden administration's recent tightening of export controls targeting Chinese technology companies, increasing the stakes for tech firms operating across borders. The dynamic regulatory environment can hinder established partnerships and inhibit innovation at both ends.
While both nations engage in this technological arms race, it is clear both sides perceive each other as threats. The U.S. believes China's technological advancements challenge its national security, prompting the implementation of stricter outbound investment controls on American investments involved with sensitive technologies. This regulatory web highlights the serious geopolitical tensions at play, as China seeks to procure and develop technology to reduce dependency on foreign firms, particularly those based within the U.S.
The developed rules under the Biden administration would prohibit or require notifications for certain types of outbound investments tied to technologies such as semiconductors and artificial intelligence, operational from January 2025. The Department of the Treasury’s initiative aligns with G7 discussions on the need for such restrictions, emphasizing the growing urgency behind the U.S.'s defensive measures against perceived threats.
Interestingly, this status quo imposes not only risks but also new opportunities for collaboration. With recent calls for dialogue from Chinese officials, the necessity for establishing comprehensive frameworks to govern semiconductor and tech trade relations is increasingly apparent. Sun's statements reiterate the need for cooperative engagement to stabilize global supply chains, remarking, "The Chinese business community calls on the U.S. to earnestly comply with WTO rules and immediately halt unilateral restrictions to jointly protect the security and stability of global supply chains..."
The outcome of these tensions will not only affect the semiconductor industry but extend to the broader technological and economic landscapes of both nations. The international community watches closely, as the repercussions from the U.S.-China tech competition could reshape global markets and influence future technological collaborations. The stage is set for significant developments as both countries navigate these challenging waters, striving to maintain their competitive edge and ensuring their respective interests remain protected.
