(Yicai Global) Aug. 4 -- China has started investigating a number of auto chip dealers on suspicion of selling products at much higher prices than what is considered reasonable.

The State Administration for Market Regulation said yesterday that it will start looking into chipmakers suspected of price gouging. It did not name the firms, but said that it will keep a close watch on the prices of chips and other key commodities, as well as further tighten regulations and law enforcement.

The investigations will aid the long-term development of the industry, though it may trigger stock fluctuations in the automotive semiconductor sector, according to Cinda Securities. Some agents have squeezed small downstream manufacturers causing widespread discontent, it added.

The shares of several auto-chip makers sank yesterday. Silan Microelectronics [SHA:600460] fell as much as 9.6 percent yesterday, but closed up 5.1 percent today at CNY65.53. GigaDevice Semiconductor Beijing [SHA:603986] plunged by the exchange-imposed limit yesterday, but gained 1.7 percent today to CNY201.35.

China has been hit by a global chip shortage since the end of last year amid the Covid-19 pandemic, which led chip prices to soar. The cost of some microprogrammed control units reached USD50 this year from USD8 in 2020.

Some Chinese companies are buying chips a 20 times their global market price, a former head of Samsung Electro-Mechanics recently told Yicai Global.

Chip speculators have earned as much in the past six months as they normally would in 10 years, the head of a domestic electronics supply chain company told Yicai Global, adding that a lot of people involved in trading and logistics are speculating in chips because of its so lucrative.

Dealers do not share their speculative profits with chipmakers, so that the crackdown will have no impact on the manufacturers, said Fang Jing, chief analyst of the electronics industry at Cinda Securities. Instead, it can clean up downstream sales channels for them.

Major chip manufacturer Nexperia filed a USD37 million breach-of-contract lawsuit against its Chinese agent ZLG Electronics in Hong Kong in June. The firm said that the distributor violated both the distribution and pricing agreements.

Editor: Futura Costaglione