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China remains a crucial market for US chipmakers amid growing tensions

China remains a crucial market for US chipmakers amid growing tensions


US-China Chip War Chart

Wong Yu Liang | Instant | Getty Images

China remains a key market for most U.S. chipmakers, despite Washington's efforts to restrict chip sales in the country and despite Beijing's push for self-sufficiency in the semiconductor sector.

Data from S&P Global showed that U.S. chip giants Intel, Broadcom, Qualcomm and Marvell Technology all generate more revenue in China than in the United States.

The United States has adopted a series of export controls starting in October 2022 aimed at restricting China's access to advanced chip technology, particularly those used in AI applications.

“China remains an important market for U.S. chipmakers, and U.S. restrictions on the sale of advanced AI chips to China were designed specifically to allow most U.S. companies to continue selling most types of chips to Chinese customers,” said Chris Miller, author of “Chip War.” “, told CNBC.

Used in a wide range of products, from smartphones to electric vehicles, semiconductors have become a top priority for governments around the world.

According to data from technology consultancy Omdia, China consumes nearly 50% of the world's semiconductors as it is the largest market for assembling consumer devices.

U.S. chipmakers, which enjoy a technological lead over their Chinese competitors, have been able to exploit this demand as U.S. export restrictions focus on some very specific products.

“There are still plenty of 'high-end' chips with all types of permitted use cases that are good to use where U.S.-based chip companies have the dominant advantage,” said William B. Bailey, senior technology, media and telecommunications analyst. at Nasdaq IR Intelligence.

Navigating Export Restrictions

American chipmakers, even those with the majority of their operations in the United States, such as Micron Technology, AMD and Nvidia, have struggled to serve their Chinese customers, even in the face of export controls.

When the first wave of US restrictions took effect in late 2022, Nvidia and Intel designed modified versions of AI chips for the Chinese market.

A year later, the United States updated its export rules to address these perceived shortcomings. But soon after, it was reported that Nvidia was working on a new chip manufactured for China.

Intel reportedly continued to sell hundreds of millions of dollars worth of laptop processor chips to U.S.-sanctioned Chinese telecommunications company Huawei thanks to an export license issued by Donald Trump's administration.

The company did not respond to a request for comment on its plans for the Chinese market.

AMD has also designed an AI chip for China, but will have to apply for an export license after failing to get it past US regulators last month.

Executives from Intel, Qualcomm and Nvidia were reportedly part of a group that planned to lobby Washington against tighter chip restrictions in July last year.

The companies are also members of the Semiconductor Industry Association, a major U.S. semiconductor trade organization, which issued a statement around the same time calling for an easing of tensions and an end to additional sanctions due to the importance of Chinese market for domestic chip manufacturers.

Faced with the harsh policies of the United States, China has also responded in the same way. In May last year, chips produced by US-based Micron were banned from critical information infrastructure in China after failing a review by the country's Cyberspace Administration.

Micron is building a new assembly and test manufacturing facility at an existing site in Xi'an, China, as the country “remains an important market for Micron and the semiconductor industry,” a representative told CNBC. company spokesperson. Production is expected to start in the second half of 2025, they said.

Concerns related to market share

China is working to become self-reliant by developing its domestic semiconductor industry in response to countries like the United States and the Netherlands limiting its access to cutting-edge technologies.

Beijing has doled out billions of yuan in subsidies to its chip companies in a bid to boost domestic production.

An analysis of Huawei's Mate 60 Pro smartphone by TechInsights has revealed an advanced chip manufactured by leading Chinese chipmaker SMIC. The smartphone would also be equipped with 5G connectivity. US sanctions aim to prevent Huawei from accessing this technology.

The Chinese government is working “increasingly” to get its companies to buy locally made chips, Miller said. “Unless foreign companies have a substantial technological advantage over their Chinese competitors, they will lose market share in China.”

However, Phelix Lee, an equity analyst at Morningstar, said she doesn't expect “a supply chain overhaul” even though Chinese companies could innovate on traditional chips found in everything from household appliances to medical equipment.

Existing chips are generally mature or low-end semiconductors. U.S. Commerce Secretary Gina Raimondo said about 60% of these chips are made in China.

According to Brady Wang, associate director at Counterpoint Research, in the AI ​​GPU market segment, U.S. companies such as Nvidia and Intel are estimated to have a technology lead of about three to five years over their Chinese competitors.

“We believe China can still develop its local GPU supply chain for specific market segments, but the amount will be limited and the cost will be much higher,” he added.




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