us tightens chip export controls amid rising tensions with china
Washington D.C., Thursday, 12 December 2024.
The US Department of Commerce is set to introduce new semiconductor export controls targeting Chinese companies. This move aims to close loopholes allowing Chinese access to advanced AI chips through third-party countries. The new rule, expected by the end of the month, focuses on restricting global shipments of powerful GPUs crucial for AI training. These measures are part of a broader effort to maintain US leadership in AI technology. NVIDIA, a key player in the chip market, may face significant impacts on its sales in China. The decision reflects a rapid escalation in the ongoing tech conflict between the US and China. It follows earlier sanctions and highlights the US’s strategic efforts to curb China’s technological advancements. As tensions rise, China’s retaliatory measures include investigations into US companies, indicating a deepening tech war that could reshape global semiconductor dynamics.
Market impact and investor concerns
NVIDIA’s stock has shown significant volatility in response to these developments, with shares dropping 5.2% in early December [4]. Despite this setback, the company has maintained strong overall performance with a 180% increase in 2024 [4]. The potential financial impact could be substantial, as NVIDIA faces possible fines in China ranging from US$100 million to US$5 billion, based on its 2023 China earnings of US$10.4 billion [2].
China’s retaliatory measures
Beijing has launched strategic countermeasures, including an anti-monopoly investigation into NVIDIA’s Mellanox Technologies acquisition [4]. The Chinese government has also restricted exports of critical materials like germanium and gallium [2]. These actions follow China’s pattern of targeting US semiconductor companies, as demonstrated by previous restrictions on Micron Technology [2][4].
Shifting business landscape
NVIDIA’s position in China has already seen significant changes, with data-center sales dropping from 19% to 14% between fiscal 2023 and 2024 [4]. The new US export controls aim to prevent Chinese companies from accessing advanced AI chips through third-party countries [1][3]. This regulatory tightening, drafted with input from Commerce Secretary Gina Raimondo and National Security Adviser Jake Sullivan, represents a significant escalation in US-China tech tensions [1].