US-China chip war graphic
Wong Yu Liang | Moment | Getty Images
China remains an essential market for most US chipmakers despite Washington’s efforts to curb chip sales in the country and amid Beijing’s push for semiconductor self-sufficiency.
Data from S&P Global showed that US chip giants Intel, Broadcom, Qualcomm and Marvell technology All generate more revenue from China compared to the US
The US passed a series of export controls starting in October 2022 aimed at limiting China’s access to advanced chip technology, particularly those used in artificial intelligence applications.
“China remains an important market for U.S. chipmakers, and U.S. restrictions on the sale of advanced AI chips to China are specifically designed to allow most U.S. companies to continue selling most types of chips to Chinese customers,” he said. Chris Miller, author of “Chip War.” ,” he told CNBC.
Semiconductors used in a wide range of products, from smartphones to electric vehicles, have become a top priority for governments worldwide.
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.
US chipmakers, which enjoy a technological lead over Chinese rivals, have been able to take advantage of this demand as US export restrictions focus on some very specific products.
“There are still a lot of ‘high end’ chips with all types of enabled use cases that are good to go where US-based chip companies have the dominant advantage,” said William B. Bailey, chief technology, media and telecommunications analyst . at Nasdaq IR Intelligence.
Navigating export curbs
American chipmakers, even those with a majority of operations in the US, such as Micron technology, AMDand Nvidiahave tried to serve their Chinese customers even in the face of export controls.
When the first wave of U.S. restrictions took effect in late 2022, Nvidia and Intel designed modified versions of AI chip products for the Chinese market.
A year later, the US updated its export rules to address these loopholes. But soon after, it was reported that Nvidia was working on a new chip made for China.
Intel has reportedly continued to sell hundreds of millions of dollars worth of laptop processor chips to the US-imposed Chinese telecom company Huawei, thanks to an export license issued by the Donald Trump administration.
The company did not respond to a request for comment on its plans for the China market.
AMD has also designed an artificial intelligence 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 had According to reports he was 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 US semiconductor trade organization, which issued a statement around the same time calling for an easing of tensions and an end to further sanctions because of the importance of the Chinese market to domestic chip companies.
Amid a tough policy stance from the US, China has also responded in kind. In May last year, chips made by US-based Micron were banned from critical information infrastructure in China after failing checks by the country’s Cyberspace Administration.
Micron is building a new production assembly and test facility at an existing site in Xi’an, China, as the country “remains an important market for Micron and the semiconductor industry,” a company spokesperson told CNBC. Production is estimated to start in the second half of 2025, they said.
Concerns about market share
China is fighting for self-reliance by building its domestic semiconductor industry in response to countries such as the US and the Netherlands restricting its access to advanced technology.
Beijing has doled out billions of yuan in subsidies to its chip companies in a bid to boost domestic production.
A review of Huawei’s Mate 60 Pro smartphone by TechInsights unveiled an advanced chip made by China’s leading chipmaker SMIC. The smartphone is also said to be equipped with 5G connectivity – US sanctions aim to block Huawei’s access to this technology.
The Chinese government is “increasingly focused” on getting its companies to buy chips locally, Miller said. “If foreign companies do not have a substantial technological advantage over domestic Chinese competitors, they will lose market share in China.”
But Phelix Lee, an equity analyst at Morningstar, said he did not expect “an overhaul of the supply chain” even as Chinese companies could innovate legacy chips found in everything from home appliances to medical equipment.
Legacy chips are typically mature or lower-level semiconductors. said US Commerce Secretary Gina Raimondo about 60% of these chips are made in China.
According to Brady Wang, deputy director of Counterpoint Research, in the GPU AI market segment, US companies such as Nvidia and Intel are estimated to have a technology lead of about three to five years over Chinese competitors.
“We believe that China can still build the local GPU supply chain for certain market segments, but the amount will be limited and the cost will be much higher,” he added.