China challenges U.S. chip export controls at the WTO
China is doubling down on its complaints at the World Trade Organization as a trade war with the U.S. seems to be morphing into a broader tech war. It was only a week ago that WTO panels backed Beijing by ruling against American tariffs on imported steel and aluminum, which were first implemented by the Trump administration in 2018 to protect national security. China is now pushing back against the Biden administration's sweeping ban on chip exports, which was also flagged as a national security priority.
Backdrop: Semiconductor stocks were roiled in mid-October after new rules prohibited U.S. companies from working with Chinese chipmakers in an effort to keep some technologies from getting into the hands of the Chinese military. American semiconductor players were also banned from selling chips designed for use in artificial intelligence, high-performance computing, data centers and supercomputers unless they secured an export license. While the U.S. has said the new export restrictions were not as an effort to sideline the Chinese economy, Beijing doesn't appear to be convinced, calling the recent actions trade protectionism.
"China's filing of a lawsuit at the WTO is to resolve China’s concerns through legal means and is a necessary way to defend its legitimate rights and interests," the Commerce Ministry wrote in a statement. Goldman Sachs even forecasts that the ban will shave a quarter of a percentage point off China's economic growth in 2023, at a time when it's already dealing with the fallout (and easing) of its zero-COVID policy.
Go deeper: Reuters reports that China is preparing a more than 1T yuan ($143B) support package for its semiconductor industry, which would include subsidies and tax credits to boost domestic chip production and research activities. The move would be big step towards self sufficiency that could be implemented as soon as the first quarter of 2023. It follows the CHIPS and Science Act approved by the U.S. in early August, which consists of $52B in loans, grants and other incentives, as well as billions in tax credits to support local chip manufacturing.
Related: AMD (NASDAQ:AMD), Applied Materials (NASDAQ:AMAT), Broadcom (NASDAQ:AVGO), Intel (NASDAQ:INTC), Micron (NASDAQ:MU), Nvidia (NASDAQ:NVDA), Qualcomm (NASDAQ:QCOM), Taiwan Semiconductor Manufacturing (NYSE:TSM) and Texas Instruments (NASDAQ:TXN).