No one will win the tariff war.

According to foreign media reports, the Office of the United States Trade Representative (USTR) will hold a hearing on Chinese-made traditional chips (also known as basic or mature process chips) on March 11 local time, and may impose more tariffs on traditional chips from the Chinese mainland. Such chips are widely used in everyday items such as cars, washing machines and telecommunications equipment, and higher tariffs could have an impact on related industries.

Tariff broadsword or to China mature process chips

Mature process chips refer to manufacturing techniques that are more than 10 years old and are generally simpler than chips used in AI or high-end microprocessors. Nevertheless, it is a key component of many consumer products and industrial equipment. Currently, China accounts for about 30% of global production capacity in the mature chip sector, and it is estimated that it will grow to 46% in a decade.

According to a December report by the Commerce Department, two-thirds of the products used in chips in the United States contain older Chinese-made chips, and half of American companies, including some in the defense industry, cannot even identify the source of their chips.

On December 23 last year, former US President Joe Biden asked the Office of the US Trade Representative to launch a Section 301 investigation with the goal of protecting semiconductor manufacturers in the US and other countries from China's state-led large-scale domestic chip production program affecting fair competition in the market.

In fact, the United States has imposed a 50 percent tariff on polysilicon produced in China since January 1 this year.

No one will win the tariff war

Reaction to the survey has been mixed. For example, the China Association of Automobile Manufacturers has submitted a position paper, saying that China's automotive chip industry has not achieved its development goals through unfair competition or violation of market mechanisms. In addition, the Chinese Chamber of Commerce for importers and exporters of mechanical and electrical products opposes the new tariffs, arguing that they will drive up the US inflation rate and have a significant impact on US households, consumers, importers, exporters and local businesses.

China's semiconductor industry with huge production capacity and ultra-low prices, "big kill", directly let Western companies generally fear.

Just two years ago, a mainstream 150mm wafer from Wolfspeed cost $1,500, but Chinese manufacturers are now offering it for as little as $500, according to a sales executive at a German chipmaker. The executive despaired that China had launched "a bloody knockout match".

There is no coincidence. Since last year, the results of a number of mature process chip makers in the United States have plummeted and triggered layoffs. Wolfspeed, once a leader in silicon carbide wafers, has seen its share price fall 96 per cent in three years and cut 20 per cent of its workforce. Microchip's revenue plunged 41.9% in the third quarter of fiscal year 2025 ended December 31, 2024, and it announced that it would close some factories and lay off employees this year. Us chip giant On Semiconductor's fiscal year 2024 GAAP net profit fell 32.5% year on year, announced fiscal year 2025 global layoffs of about 2,400 people.

China responded with a move

It is worth mentioning that on January 16 this year, China's Ministry of Commerce also plans to launch an investigation into low-priced chips imported from the United States with mature processes.

A spokesperson for the Ministry of Commerce said at the time: The domestic chip industry has reflected that for some time, the Biden administration has given a large number of subsidies to the chip industry, and US companies have thus obtained unfair competitive advantages and exported relevant mature process chip products to China at low prices, which has damaged the legitimate rights and interests of China's domestic industry. The concerns of China's domestic industries are normal, and they have the right to apply for trade remedy investigations. As for the applications and appeals of domestic industries, the investigation authorities will examine them in accordance with relevant Chinese laws and regulations and WTO rules, and will initiate investigations in accordance with the law.

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