The U.S. Department of Commerce has intensified the ongoing “chip war” between the United States and China by effectively blocking all semiconductor deals with China, including prohibiting exports of low-end artificial intelligence (AI) chips, on Oct. 17 (local time).
The Ministry of Trade, Industry, and Energy stated through a press release on Oct. 18, “We anticipate the impact of the strengthened U.S. export controls on our industry to be limited. For advanced AI chips, domestic production is minimal, and consumer chips are expected to be exempt from control, so the anticipated impact is considered to be insignificant. For semiconductor equipment, our companies have obtained VEU approval, so the impact of these measures is almost non-existent.”
The recent addition to U.S. export controls is seen as a response to prevent Nvidia, an AI semiconductor manufacturing company, from continuing to supply AI chips to China by lowering specifications to evade the semiconductor export control standards announced in October of the previous year. In fact, this latest measure introduces additional “performance density” standards for AI chips, leading to the export control of Nvidia’s low-end AI chips, the A800 and H800. Moreover, the United States has decided to control semiconductor exports to companies with holding companies located in China, Macau, or countries subject to U.S. arms embargoes, regardless of their actual location.
Gina Raimondo, the U.S. Secretary of Commerce, said, “The new measures aim to address the shortcomings of the export regulations announced in October last year, with the goal of preventing their exploitation for China’s military advancement. Export control regulations will be updated at least annually.” She also emphasized that the intention is not to harm China’s economy.
The U.S. Semiconductor Industry Association strongly criticized the additional restrictions imposed by the United States through a statement. The association pointed out, “These restrictions are excessively broad and unilateral, and they may not enhance national security because they could encourage China to explore alternative sources. There is potential harm to the U.S. semiconductor ecosystem.” Rene Haas, CEO of U.K. semiconductor design company ARM, attended the WSJ Tech Live Conference on the same day and discussed how GPUs are a part of computing system components. He stated that the recent U.S. export control guidelines may not entirely block China’s access, and he emphasized that defining a list of components that are deemed critical for military use and applying regulatory guidelines alone might not be enough to address the issue.
Since the U.S. government’s announcement of additional chip export control policies on China, Nvidia, the leading AI semiconductor manufacturer that had been selling low-end chips to China, saw its stock price drop by as much as 7.8 percent during the trading day. This marked the largest intraday decline since December of the previous year. Other semiconductor companies like Intel also experienced declines in their stocks. The Philadelphia Semiconductor Index (PHLX), which comprises 30 semiconductor-related stocks, lost approximately U$73 billion in market capitalization on the same day.
China has strongly pushed back against the additional sanctions imposed by the U.S. government. Liu Pengyu, the spokesperson for the Chinese Embassy in Washington, stated, “The U.S. actions run counter to market economic principles and only serve to destabilize the global supply chain. We are firmly opposed to the new restrictions. We will closely monitor the situation and will protect our legitimate rights and interests,” hinting at possible retaliatory measures.