Produced by: Tarun Mishra
Designed by: Manoj Kumar
The Biden administration has unveiled a set of comprehensive restrictions targeting the export of advanced semiconductor chips to China. These measures aim to address and close existing loopholes within the export framework.
Following the announcement of these restrictions, US chip stocks observed a significant downturn, impacting major players in the industry, including Advanced Micro Devices and Intel.
The motivation behind these new curbs is to rectify and close any loopholes that became apparent subsequent to the initial imposition of export restrictions on chips by the United States in October.
The primary objective of these restrictions is to thwart the Chinese military's ability to procure advanced semiconductors and associated equipment. It is part of a broader effort to bolster national security.
In response to the export restrictions, Nvidia, a prominent chip manufacturer, has indicated that it will face obstacles in selling two high-end artificial intelligence chips (A800 and H800) designed specifically for the Chinese market. Furthermore, one of the company's gaming chips will also be affected by these constraints.
While these restrictions also affect other chip manufacturers, industry analysts anticipate that Nvidia will experience the most significant repercussions. This is primarily due to China accounting for up to 25% of Nvidia's revenue stemming from data centre chip sales. Consequently, Nvidia's shares, recognised as a leading stock in the industry, plummeted by as much as 4.7% following the announcement.
The Semiconductor Industry Association, representing the lion's share of the US semiconductor industry by revenue, has voiced concerns regarding the scope of these new restrictions. It argues that their overly broad application could inadvertently harm the US semiconductor ecosystem without commensurate advancements in national security, potentially driving international customers to explore alternative sources.
The Chinese embassy has taken a firm stance against these newly introduced restrictions. It's important to note that these measures are not solely directed at China; they also encompass Iran and Russia. The restrictions will officially go into effect after a 30-day grace period.
The ongoing exchange of trade actions between the world's two largest economies has raised serious concerns about the rise of "resource nationalism." Governments are increasingly stockpiling critical materials, such as gallium and germanium, as a means of exerting influence over other nations.
China plays a pivotal role in the global supply chain of gallium and germanium, producing a staggering 80% of the world's gallium and 60% of germanium. This development carries profound implications on a global scale, as governments worldwide, including Japan and the Netherlands, have taken measures to restrict the export of chip technology to China, amplifying concerns over resource nationalism and its far-reaching impact.