[News] Biden Launches Probe into Chinese Legacy Chips, with Taiwanese Foundries Poised to Benefit

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According to a report from UDN News, citing Bloomberg, on December 23rd, U.S. President Joe Biden announced the formal launch of a Section 301 investigation into Chinese-manufactured legacy semiconductors, citing potential risks to national security and critical infrastructure.

The Section 301 investigation enables the U.S. Trade Representative to determine whether China’s actions are “unreasonable” or “discriminatory” and whether they burden U.S. commerce. If such findings are confirmed, the future administration could impose retaliatory tariffs or restrict imports, as noted in the report. Since the probe is expected to take several months, the decision on whether to impose higher tariffs on these chips will be left to the incoming president, Donald Trump.

TrendForce believes the investigation aims to tighten controls on China’s mature-node semiconductor technology, curbing its rapid expansion and addressing the downward pricing pressures it exerts on the global market.

The Applications of Legacy Chips and U.S. Concerns Over Supply Chain Reliance

Legacy chips, as highlighted in the report, play a critical role in a variety of applications, including electric vehicles and household appliances. They are extensively utilized in everyday essentials such as automobiles, washing machines, communication devices, and medical equipment.

The report quotes U.S. Secretary of Commerce Gina Raimondo, who stated on the 22nd that heavy reliance on China for the production of legacy chips could pose a national security risk. She underscored the importance of establishing a resilient supply chain for these chips, referencing the disruptions during the pandemic when chips were unavailable.

The Influence on Taiwan’s Foundries: Restoring Prices from China’s Low-Pricing Strategies

With regard to the impact on Taiwan’s manufacturers, another report from Economic Daily News indicates that industry sources generally view this U.S. investigation as more beneficial than harmful to Taiwanese foundries. They believe it could aid in restoring pricing stability within the industry.

The Economic Daily News report cites Leuh Fang, Chairman of TSMC affiliate Vanguard International Semiconductor, who recently stated that the U.S.-China tech war, along with the trend of Western customers shifting their supply chains away from China, has created significant opportunities for Taiwanese foundries. These opportunities, he noted, are expected to make substantial contributions to revenue this year and next, particularly in the power management IC product line.

Also, the report from Economic Daily News notes that the launch of the U.S. investigation is expected to hinder Chinese foundries from continuing to undercut prices to secure orders, thereby fostering a more stable market environment. As mentioned in the report, Chinese manufacturers have adopted highly competitive low-pricing strategies to address their surplus production capacity of legacy chips.

According to TrendForce’s press release and report, due to China’s domestic IC substitution policy, the increase in mature process capacity is expected to be primarily driven by Chinese foundries by 2025. With the expansion of new production capacity in China, it is estimated that by the end of 2025, the share of mature process capacity held by Chinese foundries among the top ten global foundries will exceed 25%, with the largest capacity increase in 28/22nm nodes.

Earlier this year, the White House has announced plans to raise tariffs on Chinese chips from the current 25% to 50% by 2025.

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