us chip export policy backfires: will restrictions boost foreign competitors?
Washington, Wednesday, 23 April 2025.
New warnings suggest that current U.S. export controls on chips could seriously damage the competitiveness of the American semiconductor industry. The complex rules may drive customers to seek alternatives from other countries. A recent survey indicated that almost half of respondents have already lost sales to Chinese competitors because of these controls. Industry groups are now urging the Bureau of Industry and Security to revise its policies. They advocate for changes that would allow American companies to better compete globally. The restrictions are also making due diligence a major compliance challenge for 75% of companies.
Nvidia faces headwinds
Nvidia, a major player in the chip industry, is directly affected by these export restrictions [1]. The U.S. government’s requirement for licenses to export H20 processors to China is expected to cost Nvidia $5.5 billion in quarterly earnings [3]. Nvidia’s CEO, Jensen Huang, reportedly traveled to China in an attempt to address concerns and reaffirm the company’s commitment to the Chinese market [3]. However, these efforts may not fully mitigate the financial impact, as Chinese firms actively seek domestic alternatives [3].
Huawei gains ground
As U.S. restrictions hamper American companies, Huawei Technologies is preparing to begin mass shipments of its 910C AI chip to Chinese customers as early as May 2025 [3]. This development positions Huawei as a strong competitor in the Chinese market. Paul Triolo, a partner at Albright Stonebridge Group, suggests that Huawei’s Ascend 910C GPU could become the preferred choice for Chinese AI developers due to the U.S. export curbs on Nvidia’s H20 [3]. This shift could significantly impact Nvidia’s market share and revenue in China [1][3].
Industry-wide concerns
The U.S.-China Business Council reports that the Bureau of Industry and Security’s recent regulations are already harming U.S. companies [2]. These rules incentivize foreign firms to remove U.S.-origin goods from their chip supply chains [2]. The council also warns that if the current foreign direct product rule remains unchanged, it will cause a ‘global migration away’ from U.S. chip tool suppliers [1]. To compensate for potential losses, these suppliers may be forced to increase prices for their remaining customers, which include American chip equipment producers [1].
Expert opinions and market outlook
Wedbush analysts suggest that the markets, tech industry, and global economy urgently need U.S.-China trade negotiations [3]. However, they also anticipate minimal guidance from tech companies during the current earnings season, describing the situation as ‘playing darts blindfolded’ [3]. The situation is further complicated by the possibility of new export controls on open-source technologies related to semiconductors and artificial intelligence [2]. These potential controls could further restrict the operations of U.S. firms and impact investor confidence [2].
Potential policy revisions
Industry groups are actively advocating for the Bureau of Industry and Security to revise its export control policies [1]. They propose harmonizing controls with allies or eliminating licensing rules that prohibit U.S. individuals from servicing certain chip technology in China [1]. Another recommendation involves revising the December rule concerning foreign direct product rule controls [1]. Specifically, they suggest that these restrictions should apply only to products with more than 10% U.S.-origin integrated circuits [1]. These revisions aim to provide American companies with greater flexibility to compete in the global market [1].