Why It Matters

China now produces a third of the world's mature-node chips, controls a growing share of a market segment essential to defense, automotive, medical devices, and aerospace, and has built this capacity partly with state funding exceeding $150 billion, while U.S. firms face competitive pressure from nonmarket practices. A Congressional Research Service (CRS) report, released on Aug. 20, examines China's dominance in mature-node semiconductor production and the U.S. government's trade response.

The U.S. Trade Representative (USTR) determined in December 2025 that China's semiconductor policies are actionable under Section 301 of the Trade Act of 1974, which grants the USTR authority to investigate foreign trade practices deemed unjustifiable, unreasonable, or discriminatory. Congress now faces questions about how to enforce restrictions on advanced chip technology, whether allied nations will match U.S. export controls, and whether tariffs or negotiated settlements will slow China's advance in a segment that dominates global chip sales by volume.

The Big Picture

Mature-node chips, typically manufactured at the 22nm to 28nm node size or larger, accounted for 88% of global chip sales by volume in 2023 and 40% by value. They power most commercial and defense applications, from 5G communications and electric vehicles to smart devices and avionics. China's share of the 28nm–65nm market rose from 18% in 2020 to 31.5% in 2023, per IC Insights data cited in the report. Over half of global mature-node chip capacity growth between 2020 and 2023 occurred in China, as the country pursued plans announced in 2014 to establish a vertically integrated semiconductor industry with domestic production meeting 80% of Chinese demand by 2030.

The CRS report details how Chinese semiconductor firms benefit from tax preferences, market barriers, discriminatory procurement and intellectual property practices, and state-backed financing. China has used patent litigation, intellectual property theft, and technology transfer pressure to advance its capabilities. Some U.S. semiconductor firms have partnerships in China, have accepted the People's Republic of China's (PRC) incentives, or operate under PRC terms, and U.S. allies and partners have, in some cases, contributed to building PRC chip capacity.

USTR's December 2025 affirmative determination found that China's targeting of the semiconductor industry is unreasonable and burdens U.S. commerce. USTR announced new tariffs on Chinese semiconductors with an initial rate of 0 percent, set to increase on June 23, 2027, with the specific rate to be announced no later than 30 days before that date.

Congress has moved to constrain Chinese chip capacity through the CHIPS and Science Act, which appropriated $52.7 billion in federal funding and provided tax incentives to expand U.S. semiconductor manufacturing, and set a threshold prohibiting award recipients from producing technology below the 28nm node in China for 10 years.

The Bottom Line

While Congress and the administration have restricted advanced technologies and incentivized domestic production, China continues expanding mature-node capacity at scale, a segment where process node does not always indicate performance and where technological advancement through new materials and packaging can enhance older chips.

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