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China launches probe into U.S. chip subsidies

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China alleges subsidies have harmed Chinese mature node

chipmakers

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Probe latest Chinese retaliation against U.S. chip export

controls

(Adds context in paragraphs 3, 5-6, and 11)

By Eduardo Baptista

BEIJING, Jan 16 (Reuters) - China will launch an

investigation into U.S. government subsidies to its

semiconductor sector over alleged harm caused to Chinese mature

node chipmakers, the commerce ministry said on Thursday.

Unlike the cutting-edge chips that power artificial

intelligence models, mature node chips are cheaper, easier to

manufacture, and used for less complex tasks, including home

appliances and communications systems.

The investigation is the latest salvo in Beijing's policy of

retaliating against Washington's ever-broadening scope of

restrictions targeting China's semiconductor industry, which the

Biden administration has alleged could go on to dominate global

supply chains and help the Chinese military become

technologically superior to its U.S. counterpart.

"The Biden administration has given a large amount of

subsidies to the chip industry, and U.S. enterprises have thus

gained an unfair competitive advantage and exported relevant

mature node chip products to China at low prices, which has

undermined the legitimate rights and interests of China's

domestic industry," China's commerce ministry said in a

statement.

Soon after the commerce ministry's announcement, the China

Semiconductor Industry Association published its own statement

supporting the probe.

The association, whose board is made up of executives from

the country's largest chip companies, said the Biden

administration's CHIPS and Science Act, which in 2022 pledged

$52.7 billion in subsidies for U.S. semiconductor production,

research, and workforce development, "seriously violated the

basic laws of the market economy".

Beijing's accusation echoes the Biden administration's

reasoning for announcing a tariff hike on all Chinese chip

imports in September, and a probe into China's mature chip node

industry last month, which U.S. Trade Representative Katherine

Tai said had expanded capacity, artificially lowered prices and

hurt competition using Chinese state funds.

Washington has also over the past three years tightened

export controls targeting the sale of advanced U.S.-made AI

chips to China.

It is unclear what retaliatory action will come out of the

Chinese government's probe but U.S. firms such as Intel ( INTC )

that sell mature node chips to the Chinese market could be

affected.

Intel ( INTC ) did not immediately respond to a request for comment.

While China's semiconductor industry overall lags behind

that of the United States, Beijing is widely seen to have

retaliated against Washington's chip curbs using measures such

as limiting exports of rare earth metals and launching an

investigation into U.S. AI chipmaker Nvidia ( NVDA ) over

suspected violations of its anti-monopoly laws.