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US-China chip war: Beijing unhappy at latest wave of US restrictions

In the escalating chip war between the US and China, the Biden administration has announced new restrictions on the export of advanced chips to China, affecting companies like Nvidia, Advanced Micro Devices, and Intel. These measures aim to close loopholes that emerged after previous export curbs were imposed last year. The restrictions are intended to prevent China’s military from acquiring advanced semiconductors or equipment. Nvidia, in particular, is expected to be heavily impacted as the Chinese market accounts for up to 25% of its data center chip sales. As a result, the company’s shares fell by as much as 4.7% after the announcement. However, both the Semiconductor Industry Association and the Chinese embassy expressed opposition to the new restrictions. This ongoing battle raises concerns about the potential rise of “resource nationalism” and its implications for global supply chains of critical materials.

US-China chip war: Beijing unhappy at latest wave of US restrictions

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Background

The ongoing trade war between the United States and China has taken a new turn with the US imposing fresh restrictions on the export of advanced chips to China. The Biden administration announced these restrictions in an effort to prevent China’s military from importing advanced semiconductors or equipment. The move comes as a response to loopholes that were identified after the US announced export curbs on chips last October. The latest restrictions have had a significant impact on major chip manufacturers like Nvidia, Advanced Micro Devices (AMD), and Intel.

US Restrictions on Exports of Advanced Chips

The Biden administration’s new restrictions have had a direct impact on Nvidia, one of the leading companies in the semiconductor industry. Nvidia has revealed that the new export restrictions will prevent the sales of two high-end artificial intelligence chips, namely A800 and H800, which were specifically created for the Chinese market. Additionally, one of Nvidia’s gaming chips will also be blocked from sale in China. The company is expected to be hit the hardest by these restrictions as China accounts for up to 25% of its revenues from data center chip sales. Following the announcement, Nvidia’s shares experienced a decline of as much as 4.7%.

The Semiconductor Industry Association, which represents 99% of the US semiconductor industry by revenue, has expressed concerns about the new measures. It believes that these restrictions are “overly broad” and could potentially harm the entire US semiconductor ecosystem without achieving the intended national security objectives. The association argues that the restrictions may lead overseas customers to explore alternative options instead of relying on the US semiconductor industry.

The Chinese embassy has strongly opposed the new export restrictions, labeling them as unfair. The restrictions also target Iran and Russia and will come into effect in 30 days. This move by the US has further escalated tensions between the two countries.

US-China chip war: Beijing unhappy at latest wave of US restrictions

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China’s Retaliatory Measures

In response to the US restrictions on advanced chips, China has implemented its own retaliatory measures. The country has restricted the export of two materials, gallium and germanium, which are crucial for the semiconductor industry. China is a dominant player in the global supply chain of these materials, producing 80% of the world’s gallium and 60% of germanium, according to the Critical Raw Materials Alliance (CRMA) industry body.

Gallium and germanium are classified as “minor metals” and are often the by-product of other processes. These materials are vital for the production of advanced chips, and China’s restriction on their export could have significant implications for the global semiconductor industry. The country’s decision to hoard critical materials like gallium and germanium highlights concerns over the rise of “resource nationalism,” where governments exert influence over other countries by controlling vital resources.

Other Countries Imposing Chip Technology Export Restrictions

Apart from the US and China, other countries have also imposed restrictions on chip technology exports. Japan and the Netherlands, which is home to key chip equipment maker ASML, have implemented chip technology export restrictions on China. These additional restrictions exacerbate the existing tensions in the global semiconductor industry.

Japan’s restrictions on chip technology exports are aimed at preventing the transfer of technology that could be used for military purposes. The Netherlands, a major hub for chip equipment manufacturing, has also imposed its own restrictions to protect sensitive technology from falling into the wrong hands. These additional restrictions from different countries further complicate the global chip landscape and could have far-reaching consequences.

US-China chip war: Beijing unhappy at latest wave of US restrictions

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Concerns Over the US-China Chip War

The ongoing chip war between the United States and China has raised significant concerns, particularly regarding its impact on the global semiconductor industry. The restrictions on the export of advanced chips, coupled with retaliatory measures, have disrupted the supply chain and put major chip manufacturers in a difficult position. This has not only affected the revenues of companies like Nvidia, but it also threatens the stability and growth of the semiconductor industry as a whole.

With both the US and China engaged in tit-for-tat measures, there is a potential for the conflict to escalate further. The reliance of various industries on advanced chips makes this trade conflict more detrimental. It is important for both countries to find a resolution that strikes a balance between national security concerns and the needs of the global semiconductor industry.

Conclusion

The US-China chip war has had a significant impact on the global semiconductor industry, with restrictions on the export of advanced chips and retaliatory measures disrupting the supply chain. Companies like Nvidia, Advanced Micro Devices, and Intel have all been affected by these restrictions. The concerns over the rise of “resource nationalism” and the potential for further escalation highlight the delicate nature of this trade conflict. It is imperative for countries to work towards finding a resolution that ensures the stability and growth of the semiconductor industry while addressing national security concerns. A collaborative approach that promotes innovation and open trade would be beneficial for all parties involved.

US-China chip war: Beijing unhappy at latest wave of US restrictions

This image is property of ichef.bbci.co.uk.

Source: https://www.bbc.co.uk/news/business-67141987?at_medium=RSS&at_campaign=KARANGA