U.S. semiconductor stocks edged higher in premarket trading on Tuesday after the Biden administration launched a trade investigation into Chinese-made legacy semiconductors. The investigation, initiated under Section 301 of the Trade Act of 1974, could lead to new tariffs on older chips from China used in everyday products such as cars, washing machines, and telecom equipment.
Semiconductor Stocks React to Trade Probe
Key semiconductor companies saw modest gains following the news:
- Broadcom (NASDAQ:AVGO): +1.8%
- AMD (NASDAQ:AMD): +1.8%
- Marvell (NASDAQ:MRVL) Technology: +0.4%
- Micron (NASDAQ:MU): +0.1%
Meanwhile, sector-tracking ETFs, including the SOXX and SMH, rose 0.3% and 0.2%, respectively. However, Nvidia (NASDAQ:NVDA) and Taiwan Semiconductor experienced slight declines of 0.3% and 0.8%.
Protecting U.S. Semiconductor Producers
The Biden administration initiated the probe to counter China’s state-supported expansion of its chip industry. By offering chips at artificially lower prices, Chinese companies have gained an edge in global markets, posing a challenge to U.S. semiconductor producers.
U.S. Trade Representative Katherine Tai explained that the investigation is designed to safeguard U.S. market competition and prevent China from dominating the global semiconductor market.
Potential Impact of Additional Tariffs
The Section 301 investigation could result in additional tariffs on Chinese semiconductors, adding to the existing 50% tariff set to take effect on January 1. These measures aim to reduce reliance on Chinese chips and protect U.S. manufacturing capabilities.
While the investigation will conclude under President-elect Donald Trump’s administration, its initiation under Biden reflects a bipartisan focus on countering China’s influence in the semiconductor sector.
Concerns Over Global Supply Chains
China’s commerce ministry expressed concerns about the potential impact of the investigation on global chip supply chains, highlighting the interconnected nature of the semiconductor industry. New tariffs or trade restrictions could disrupt the supply of legacy chips critical to various industries.
Industry Outlook
The trade investigation underscores the strategic importance of semiconductors to U.S. economic and national security interests. As the global semiconductor landscape continues to evolve, measures like these highlight the ongoing tension between fostering innovation and addressing unfair trade practices.
