China's market regulator is taking action in response to speculation and steep price hikes in the auto chip market.

The State Administration for Market Regulation (SAMR) has opened an investigation into auto chip distribution companies suspected of price gouging, the SAMR said in an announcement Tuesday, without disclosing which companies were involved.

The SAMR will continue to pay attention to the price order of chips and other important commodities in the market, further increase supervision and enforcement efforts, and strictly investigate and deal with illegal acts including hoarding and price gouging, according to the announcement.

A semiconductor index in Shanghai extended its decline to more than 6 percent on the news.

Due to the current automotive chip supply gap and the recovery cycle, the market has seen chip distributors hoarding and increasing prices significantly, Ye Chengji, chief engineer and deputy secretary-general of the China Association of Automobile Manufacturers (CAAM), said on June 19 at the China Auto Forum said.

The chip shortage that has plagued automakers around the world for 10 months since the end of 2020 has begun to improve since the second half of the year.

In late June, Japan's Renesas Electronics Corp said it had restored 100 percent of capacity to pre-accident levels at the N3 Building of Naka Factory, which was damaged by a fire in March this year, as of late June 24.

Renesas has nearly one-third of the global market for automotive microcontroller chips, and the fire hit global automotive production hard.

Semiconductor manufacturing giant Taiwan Semiconductor Manufacturing Company (TSMC) said on July 15 that global car companies can expect a sharp uptick in chip supply in the coming weeks.

TSMC said in an earnings call that its Microcontroller Unit (MCU) production in the first six months of the year rose 30 percent over the same period last year, and will increase MCU production by nearly 60 percent this year.

Through these measures, the company expects to ease the shortage of automotive chips for its customers from this quarter, said TSMC CEO CC Wei.

Chairman of China's largest automaker expects chip shortage to ease in July