China regulator to probe auto chip distributors over price-gouging suspicions

  • A global shortage of chips began in December 2020 that disrupted the supply chains of the auto industry worldwide.
Panic about supply uncertainty has occasionally led chip buyers and distributors to purchase more chips than they need, creating a vicious cycle that further drives up prices. (Bloomberg)
Panic about supply uncertainty has occasionally led chip buyers and distributors to purchase more chips than they need, creating a vicious cycle that further drives up prices.

China's regulatory agency is launching an investigation into chip distributors in the auto industry, citing suspicions of price gouging, it said on Tuesday.

Also Read : Here's how Tata Motors is planning to bulldoze past chip shortage crisis)

The action by the State Administration For Market Regulation (SAMR) is the latest in a regulatory crackdown following a range of companies and industries targeted over the past year as the Chinese government clamps down on the industry.

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"In response to prominent problems such as speculation and high prices in the automotive chip market, the State Administration of Market Supervision has recently filed an investigation on car chip distributors," the agency said.

The firms were suspected of driving up prices, based on price monitoring and reporting clues, it added in its statement and vowed to investigate and punish illegal acts such as hoarding, price-gouging and collusion.

A global shortage of chips that began last December has disrupted supply chains and the hardware sector worldwide. Though initially concentrated in the automotive sector, it has since spread to affect a wide range of gadgets.

Panic about supply uncertainty has occasionally led chip buyers and distributors to purchase more chips than they need, creating a vicious cycle that further drives up prices.

In June, the chief executive of chipmaker Intel said he expected the shortage to hit bottom by year-end, with the market returning to normalcy only by 2023.

In April China's regulator imposed a record fine of $2.75 billion on e-commerce giant Alibaba for engaging in anti-competitive practices.

First Published Date: 03 Aug 2021, 11:29 AM IST
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