China’s Export Restrictions May Lose U.S. Leading Position in Semiconductor Industry

Chinese export restrictions, which were introduced in response to US sanctions, are having a negative impact on the US semiconductor industry. Experts believe that these restrictions could deprive the United States of leadership in this area.

Patrick Gelsinger, the head of Intel, said that Chinese export restrictions are leading to a significant decrease in the income of American companies, which is reflected in the budgets of scientific projects and the overall competitiveness of American technology giants. A similar opinion was expressed by the leaders of NVIDIA and Qualcomm.

Representatives of the US government met with businessmen, but did not make any decisive statements. The meeting took place amid rumors that the US is going to further restrict the supply of devices to accelerate computing in China, which are manufactured by NVIDIA.

The head of Intel told US officials that additional restrictive measures on the supply of Intel products to China could jeopardize plans to “restore” production on American soil. Without Chinese orders, Intel loses a significant incentive to expand its US plants. At the Aspen Security Forum, Gelsinger clarified that China is responsible for 25-30% of US semiconductor exports. Shrinking market space leads to less need for new plants. Gelsinger is convinced that it is in the interests of the US government to support the access of local enterprises to the Chinese market, as this helps to finance research and development.

NVIDIA founder and CEO Jensen Huang acknowledged in his speech that the sanctions are ineffective, explaining that the ban on the supply of NVIDIA accelerated computing devices to China only increases the demand for replacement products, worsening the company’s position in the global arena. As noted at a meeting with US regulators, the sanctions only encourage Chinese equipment manufacturers to buy more chips that can help get around these restrictions and achieve the desired results. At the same time, an increase in computing power in this way almost does not slow down the progress of research. As Huang noted, Chinese developers have optimized and efficient software that allows them to compensate for almost all restrictions on the supply of any hardware components to China.

The restrictions are also painful for American Qualcomm. This enterprise operates as a contract manufacturer and actively supplies its mobile chips to Chinese smartphone manufacturers targeting the local market. But Qualcomm’s activities are not limited to the production of Snapdragon chips, the company also specializes in manufacturing for the telecom industry and has extensive knowledge in the field of wireless technologies, switching and data transmission. Thanks to this and other collaborations, one of the world’s leading manufacturers of chips for smartphones and wireless communication devices receives up to 60% of its revenue. The loss of the Chinese market will be catastrophic for the company, while Chinese customers, albeit with difficulty, but quickly enough will be able to switch to working with alternative suppliers, especially in the telecom segment.

Jake Sullivan, the top guarantor of US national security, echoed the industry, arguing on Friday that a sanctions strategy needs to be specialized yet effective. However, he emphasized that all the restrictions already in place have not hindered the ability of US suppliers to sell a larger share of their goods to China. All subsequent restrictive measures, according to him, will be implemented after extremely thorough coordination with the companies that they may affect.

As a result, Qualcomm Corporation generates over 60% of its total income in China by providing its mobile chips to local smartphone makers. For Intel, the Chinese arena is becoming the most spacious on the planet, while it provides about a quarter of the company’s total revenue. NVIDIA, in turn, has about 20% of revenue driven by the Chinese market. The loss of such a market for any of these organizations will turn into a significant defeat that affects the global electronic market, at least noticeably slowing down technical evolution.