The Biden administration’s new advanced semiconductor export limits have been criticized by China.
China does not desire a trade war or a technological one, but it will undoubtedly respond if the United States puts further restrictions. Picture: (Source: Reuters)
Semiconductor Restrictions
Foreign ministry: limits “violate the principles of the market economy and fair competition.” Chipmaking tools and powerful chips, including two from industry leader Nvidia, are targeted. The move is considered an attempt to fix gaps discovered during the initial semiconductor restrictions wave in October. The US claimed the limitations were meant to prevent China from acquiring cutting-edge military technologies, particularly in AI.
The Biden administration disputes that it has harmed China economically, but China’s foreign ministry has described it as “forced decoupling for political reasons.” Since the announcement, Chinese technology stocks have declined somewhat. Wednesday saw the CSI Semiconductor Index fall 1.4% and the STAR Chip Index fall 1.2%. Another index tracking Chinese AI companies fell 1.8%. As the curbs hurt Advanced Micro Devices and Intel, US semiconductor stocks fell. Nvidia stated in a filing that the new export limits will prevent sales of its A800 and H800 high-end AI semiconductors in China. Blocking one of its gaming semiconductors was also announced.
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Effect on the Global Market
The limitations affect other semiconductor companies, but analysts expect Nvidia to be affected hardest because China accounts for up to 25% of its data center semiconductor sales. The statement lowered star stock Nvidia’s shares by 4.7%. The Semiconductor Industry Association, which represents 99% of the US semiconductor industry by revenue, said the new measures are “overly broad” and “risk harming the US semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere”. China restricted semiconductor industry-critical gallium and germanium exports two months ago in response.
China dominates the gallium and germanium supply chain. The Critical Raw Materials Alliance (CRMA) says it generates 80% of the world’s gallium and 60% of germanium. These “minor metals” are byproducts of other processes and are rarely encountered in nature. The US, Japan, and the Netherlands—home to ASML—have also restricted semiconductor technology exports to China. The ongoing tit-for-tat between the world’s two largest economies has generated concerns about “resource nationalism”—when governments stockpile vital minerals to influence other nations.
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