RE: Request for Comments on Section 301 Investigation of China’s Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance (Docket ID: USTR-2024-0024)

Dear Acting United States Trade Representative Millán:

The Center for Individual Freedom (CFIF) submits the following Comment on the Office of the United States Trade Representative’s (USTR’s) Section 301 investigation into China’s Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance, in support of measures to protect free-market competition and prevent China from gaining a perilous advantage in this strategically important industry.  

By now it is abundantly clear that the People’s Republic of China (PRC) seeks to become the world’s leader in emerging technologies, and that semiconductor and semiconductor-component manufacturing constitutes a central a pillar of that goal.  

In 2022, as just one illustration, Chinese leader Xi Jinping called for a “whole nation system” to achieve the CCP’s ambitions of dominating the global semiconductor market. The Chinese government understands that by controlling each segment of chip production, it can create dependence on Chinese manufacturers, and it is pursuing dominance through a proven strategy of building overcapacity, saturating markets with underpriced products, and pushing out competitors.  

In pursuit of that goal, the Chinese Communist Party (CCP) exploits unfair advantages — including government subsidies, cheap labor and wage suppression and state-directed technology and intellectual property theft — to achieve dominance.  

In terms of state-directed technology and subsidies, the CCP has invested more than $150 billion into China’s indigenous semiconductor manufacturing and R&D since 2015, more than any other country.  Last year, the state-owned National Integrated Circuit Industry Investment Fund, or “Big Fund,” completed a third round of fundraising, which produced $48 billion of capital to increase China’s chip-making capabilities.  

That continued investment by the Chinese government into the country’s semiconductor industry creates an unfair advantage for its state-sponsored manufacturers, and suggests that the United States cannot maintain its lead through domestic investment alone.  While well-intentioned, the CHIPS Act — the U.S. initiative to reshore semiconductor manufacturing and semiconductor supply chains — has been undermined by mismanagement, social activism requirements and defective central planning.  

Accordingly, a more all-of-the-above strategy that incorporates trade policies, such as export restrictions on U.S.-made products and tariffs on Chinese-made products, offers an important measure to help stop the PRC from monopolizing the semiconductor market.  

As a specific measure to advance that broader strategy, CFIF commends the USTR for including Silicon Carbide (SiC) production in this Section 301 investigation, and urges action to protect that important industry.  

SiC substrates’ efficiency, capacity for handling high power loads and performance in severe conditions make SiC wafers a preferred base for mature-node chips.  SiC-wafer chips are an essential component of many military systems, such as the Navy’s Aegis Ballistic Missile Defense,  the Terminal High Altitude Area Defense (THAAD) system, and the Patriot Missile Defense System.  SiC-wafer chips are also used in numerous domestic applications, including electric vehicle (EV) and hybrid vehicle powertrains and batteries, electrical and communications grids and renewable energy systems.  

The Chinese government understands the important applications of SiC-wafer chips, which is growing —  the global SiC market is projected to grow more than 600% between 2021 and 2027, according to a 2023 analysis — and it is attempting to corner the market, as it did solar panels, lithium batteries, automotive technology, and high-speed rail and ship-making capabilities, among other industries.  

Alarmingly, the Chinese government understands that reality, and has shaped its policy accordingly.  

In October 2024 Doris Hsu, CEO of Sino-American Silicon Products (SAS) and GlobalWafers, cautioned that “substantial capacity increases from Chinese manufacturers [is] driving prices to unprecedented lows.”  A 2023 industry report further notes that Chinese SiC patents exhibited a 23% compound annual growth rate from 2015 to 2020, and a 2024 report found that more than 70% of global SiC patent applications in 2023 were made by Chinese companies.  Finally, a December 2024 report from the Center for Emerging Technology and Security stated that, “Historically, China has accounted for 5% of the global SiC material market, but reports suggest that in 2024 more than 50% of global SiC wafer supply will come from China.”  

That data exposes the CCP’s goal: Monopolize SiC substrate and SiC wafer markets by building overcapacity, reducing prices and forcing out competitors, thereby creating a decisive advantage in the global legacy semiconductor industry.  

The United States cannot allow the PRC to accomplish that mission.  

Securing the United States’ lead in SiC production also aligns with the new Trump-Vance administration’s policy priorities. For example, President Trump recently announced the creation of Stargate, a $500 billion project to expand the United States’ Artificial Intelligence (AI) infrastructure. SiC-wafer chips are a bedrock component of AI technology, providing additional incentive for policymakers to secure U.S. companies’ SiC-production competitiveness.  

America’s continued leadership in emerging technologies thus depends on reliable access to chips made by U.S. companies and by companies headquartered in democratically aligned nations — which could shape the future of global leadership. For that reason, CFIF urges the USTR to conduct a thorough investigation into the CCP’s manipulative policies and practices, and implement appropriate trade restrictions to stop China and its state-sponsored industries from undermining free-market competition.  

Thank you for your time and consideration, and CFIF looks forward to presenting this information and discussing these issues in further detail during the USTR’s public hearings.  

Sincerely,

/s/