Auto chip distributors are suspected of jacking up prices, and regulators promise to punish hoarding and price hikes.

China’s regulatory agency is launching an investigation into auto industry chip distributors, it said on Tuesday, citing suspicions of price hikes.

The State Administration for Market Regulation (SAMR) action is the latest in a regulatory crackdown over the past year that has targeted a range of businesses and industries as the Chinese government crack down on the industry.

The companies were suspected of driving up prices, based on price monitoring and reporting of clues, the agency said in its statement, and pledged to investigate and punish illegal acts. such as hoarding, rising prices and collusion.

“In response to significant issues such as speculation and high prices in the automotive chip market, the State Market Surveillance Administration recently opened an investigation into automotive chip distributors,” the statement said.

China’s CSI All Shares Semiconductor & Semiconductor Equipment index fell about 6% after the news. Chip developers GigaDevice Semiconductor (Beijing) Inc, Wuxi NCE Power Co and Hangzhou Lion Electronics Co plunged from their 10% daily trading limit in Shanghai on Tuesday. Some Asian chip inventories outside of China related to the auto industry have also fallen.

Disrupted supply chains

A global chip shortage that began last December has disrupted supply chains and the hardware industry around the world. Although initially concentrated in the automotive sector, it has since spread to a wide range of gadgets.

Concerns about the uncertainty of supply have sometimes led chip buyers and distributors to purchase more chips than they need, creating a vicious cycle that drives prices even higher.

Investors have crowded into shares of chipmakers as the global shortage shows little sign of abating and electric car sales from China to Europe and the United States increase. These companies have also largely escaped Beijing’s crackdown on internet companies to address the industry’s “tough problems”, a move that has had a devastating impact on Big Tech and most recently felt by China’s education sector. in line.

Chinese automakers import around 90% of the high-end chips they need, and the shortage is particularly affecting them. Car sales in June fell 12.6% from the previous month, the China Association of Automobile Manufacturers said, officials citing supply constraints as the root cause.

As the global chip shortage persists, particularly in the automotive sector, higher prices have been a common theme discussed by semiconductor executives this earnings season.

In June, the CEO of U.S. chipmaker Intel said he expected the shortage to bottom out by the end of the year, with the market only returning to normal by 2023.