By Millie Turner
The US has successfully blocked two American chip companies, Nvidia and AMD, from selling certain chips to China and Russia.
As part of the country’s newly passed $52bn Chips Act, companies taking advantage of the support and desirable subsidies package on US soil must comply with a new regulation – which seeks to limit the supply of more advanced computer chips to non-ally states.
Semiconductors are used in most of today’s technology, from smartphones and computers to the systems in electric vehicles.
The US government has used new licensing requirements to “address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia,” according to a Nvidia regulatory filing on Wednesday.
Nvidia said it is in discussions with customers in China and is “seeking to satisfy their planned or future purchases” of the company’s products which are not subject to the new requirements.
The company cautioned that the move may upend the $400m (£346m) in potential sales to China it had forecast for the third quarter.
Before it was passed in August, China had lobbied against the semiconductor bill.
The Chinese Embassy in Washington called it reminiscent of a “Cold War mentality” and “counter to the common aspiration of people” in both countries.
Nvidia’s A100 and H100 graphic processing units have been banned for export. While sales of AMD’s MI250 accelerator chip have also been curbed, the company confirmed to Reuters.
Shares in Nvidia’s plunged more than eight per cent to $138.5p per share, its lowest point in a year, yesterday afternoon. Shares in AMD also sank nearly five per cent to around $80 a piece.
Both firms, which will be part of a long line of semiconductor makers receiving Stateside subsidies, are also subject to a ten-year ban from producing chips more advanced than 28-nanometers in China and Russia – or other countries the US deems a threat.
The bottom line
Governments across the world are racing to ensure they have a secure supply of computer chips.
Covid-19 restrictions and a pandemic-induced electronics boom weighed heavily on the semiconductor supply chain, which shone light on how critical domestic manufacturing of chips is to Western economies.
A trickling supply of chips during strict Covid-19 measures in China and Taiwansaw Western automotive firms, among other businesses, downgrade their production forecasts in response.
Geopolitical frictions have only worsened since 2020, with Russia’s war in Ukraine and militaristic tensions between Taiwan refusing to retreat.
The broad useof chips have made them a subject of national security in not just the US, but also in the UK, where a takeover of Welsh manufacturer Newport Wafer Fab has been at the heart of a stringent review amid a takeover by Nexperia, a Dutch manufacturer owned by a Chinese parent company.
Other governments, including Taiwan and those within the European Union, have also updated their legal capacity to be able to review, veto or block such moves, in a bid to protect their access.
A similar trend occurred during the World Wars, when concerns were raised over acquisitions that would enable foreign governments to engage in sabotage or espionage.
As long as the current geopolitical tensions remain, government concerns about shoring up chip supplies won’t go away.
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