Investing.com -- Shares of Texas Instruments (NASDAQ:TXN) and Analog Devices (NASDAQ:ADI) declined 4% and 2% respectively, as China begins an investigation into US chip grants and alleged dumping. According to Bloomberg, the probe, which was announced by China’s Commerce Ministry on Thursday, targets whether the US is unlawfully subsidizing its chipmakers and undercutting Chinese products, a move that could escalate tensions between the two economic powerhouses.
The investigation follows complaints from Chinese semiconductor companies about the US Chips Act, which allocates approximately $39 billion to encourage companies like Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co (F:SAMEq). to develop high-end chipmaking facilities in the US. The China Semiconductor Industry Association criticized the act, claiming it disrupts the global semiconductor supply chain and contravenes market economy principles.
Texas Instruments and Analog Devices, known for their lower-end chips such as power and analog chips, could face consequences if found in violation of antitrust or anti-dumping regulations. Potential repercussions include increased tariffs or fines, similar to past actions taken by Beijing against other US tech firms. For instance, Qualcomm Inc (NASDAQ:QCOM). had to alter its business practices and pay a substantial fine to resolve an antitrust case in China.
The broader implications of the investigation are significant, as US and European officials have previously expressed concerns about Chinese companies potentially flooding the market with inexpensive chips. This move by Beijing could further challenge global trade dynamics and semiconductor supply chains.
Micron Technology Inc (NASDAQ:MU). has already warned that a cybersecurity investigation by the Chinese government could impact a significant portion of its sales in China. Additionally, the US has recently implemented regulations to limit AI accelerators’ supply to China and added several Chinese entities to a trade-restriction blacklist.
The semiconductor industry is bracing for potential price drops as chipmakers ramp up production, with China’s largest chipmaker, Semiconductor Manufacturing International Corp., signaling a looming price competition. The tension comes at a time of heightened trade sanctions from the US against China, including restrictions on technology sales and the recent addition of Chinese firms to a trade blacklist.
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