China Takes Aim at Auto Chip Dealers With Global Supplies Low

China’s top market watchdog said it is investigating auto chip dealers that it suspects are driving up prices during the global chip shortage.

On Tuesday, the State Administration for Market Regulation said it would enhance market scrutiny and crack down on illegal practices like hoarding, price gouging and collusion. The regulator didn’t name any companies that were being investigated.

Car makers were among the first and hardest hit by the ongoing chip shortage in recent months. Soaring demand for semiconductors after Covid-19 lockdowns ended in many regions coincided with widespread chip manufacturing disruptions. Ford Motor Co. , General Motors Co. and Volkswagen AG , among others, shut down some production lines as a result.

While China’s auto market incurred less damage, the country’s auto industry officials have recently blamed the semiconductor shortage for declining sales. In June, China’s car sales ended an 11-month growth streak with a 5.1% decline when compared with a year earlier. Semiconductors are essential in powering various electronic systems in cars.

The world-wide race to secure chips in the automotive sector and beyond has led to price increases and booming business for the middlemen who distribute electronic components. It has also created an ideal environment for fraud and bad actors, according to a variety of experts including industry groups, chip brokers and counterfeit researchers.