USTR Initiates Section 301 Investigation on China’s Targeting of the Semiconductor Industry

On December 23, 2024, the Office of the U.S. Trade Representative (USTR) announced it was initiating an investigation into China’s acts, policies, and practices related to China’s targeting of the semiconductor industry for dominance. The investigation will be conducted under Section 301 of the Trade Act of 1974, and will focus on China’s manufacturing of foundational semiconductors (also known as legacy or mature node semiconductors).  The investigation will include reviewing the extent that such legacy semiconductors “are incorporated as components into downstream products for critical industries like defense, automotive, medical devices, aerospace, telecommunications, and power generation and the electrical grid.”  The USTR indicated that the investigation will also initially “assess whether the impact of China’s acts, policies, and practices on the production of silicon carbide substrates (or other wafers used as inputs into semiconductor fabrication) contributes to any unreasonableness or discrimination or burden or restriction on U.S. commerce.”

The USTR’s press release states that the “[e]vidence indicates that China seeks to dominate domestic and global markets in the semiconductor industry and undertakes extensive anticompetitive and non-market means, including setting and pursuing market share targets, to achieve indigenization and self-sufficiency. China’s acts, policies, and practices appear to have and to threaten detrimental impacts on the United States and other economies, undermining the competitiveness of American industry and workers, critical U.S. supply chains, and U.S. economic security.”  Further evidence indicates that China’s targeting of the semiconductor industry for dominance is leading to significant capacity expansion, artificially and unsustainably lower domestic and global prices, a protected domestic market, and emerging overconcentration of production capacity in China.  According to the USTR, China in just six years has nearly doubled its global share of foundational logic semiconductors production capacity, and its share is projected to reach approximately half of the world’s capacity by 2029.

The USTR will now seek consultations with China in connection with the investigation. In addition, the USTR is seeking public comments on:

• China’s acts, policies, and practices related to its targeting of the semiconductor industry for dominance.
• Anticompetitive and non-market means employed by China in pursuit of its semiconductor industry targeting objectives, including political guidance, directives, and control within state and private enterprises, activities of state-owned or state-controlled enterprises, market access restrictions, opaque regulatory preferences and discrimination, wage-suppressing labor practices, massive state support of industry (including government guidance funds), and forced technology transfer (including state-directed cyber intrusions and cybertheft of intellectual property).
• Whether China’s acts, policies, and practices are unreasonable or discriminatory.
• Whether China’s acts, policies, and practices burden or restrict U.S. commerce, and if so, the nature and level of the burden or restriction. This would include economic assessments of the burden or restriction on semiconductors, semiconductor manufacturing including foundries, silicon carbide substrates or other wafers, and downstream products, with a particular focus on critical industries, such as defense, automotive, medical devices, aerospace, telecommunications, and power generation and the electrical grid.
• Whether China’s acts, policies, and practices are actionable under Section 301(b) of the Trade Act of 1974 and what action, if any, should be taken, including tariff and non-tariff actions.

The docket for submitting comments will open on January 6, 2025, and any written comments must be filed no later than February 5, 2025. Comments must be filed on the USTR portal at https://comments.ustr.gov/s/. Submissions should be placed on the docket entitled “Request for Comments on the Section 301 Investigation of China’s Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance,” docket number USTR-2024-0024.

On March 11 and 12, 2025, the USTR Section 301 Committee will hold a public hearing in the main hearing room of the U.S. International Trade Commission, 500 E Street SW, Washington DC 20436, beginning at 10:00 a.m. EST. Requests to appear at the hearing and a summary of testimony must be filed by February 24, 2025; and any post-hearing comments must be filed within seven days after the last day of the public hearing. Notice of intent and summary of testimony must be filed on the USTR portal under the docket entitled “Request to Appear at the Hearing on the Section 301 Investigation of China’s Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance,” docket number USTR-2024- 0025.