The US CHIPS Act and Its Impacts on the WTO and China

In 2022 the US enacted the Creating Helpful Incentives to Produce Semiconductors(CHIPS)Act, providing USD 52.7 billion in subsidies to enhance the chip manufacturing capacity of the US semiconductor industry, attract American businesses back and encourage foreign investments .The CHIPS Act utilizes subsidies as a countermeasure against foreign subsidies in order to secure US leadership of the global semiconductor industry and advanced technology. This represents a significant policy change for the US semiconductor industry. The Act includes a guardrail clause aimed at restricting the investment in or export of advanced chips to China and this may potentially result in the fragmentation of the global chip value chain and in heightenedgeopolitical tensions. This paper discusses the objectives, subsidies, guardrail clause and clawback mechanism in the CHIPS Act, and their legality under the WTO. It also explores the impact of the CHIPS Act on the WTO and China. The US CHIPS Act is a politically sensitive issue of economic importance and legal complexity in the US-China relationship. It will also reshape the geopolitics of the global chip value chain. Subsidy poses a challenge for the WTO, and amore effective discipline on both subsidies and export restrictions should be an urgent need in a future WTO reform agenda.