The White House is pondering more extensive U.S. limitations on the sale of chips and chip-making equipment to Chinese companies, and those could have substantial impacts on Nvidia’s ability to sell to Huawei and a lesser impact on Qualcomm, according to press reports on a government contractor’s assessment of the potential economic fallout of such a move.
The Biden administration is contemplating further restrictions on exactly what can be sold to companies like Huawei, which has been blacklisted by the U.S. government but still receives billions in U.S. goods because of special licenses that were granted to some U.S. companies to enable them to continue doing business with Huawei. Huawei has consistently denied that it poses a risk to U.S. national security, but the company has nonetheless seen impacts to its bottom line as the U.S. makes the case to countries around the world that the company’s equipment should not be allowed in telecom networks, particularly new 5G networks. (The company has said, though, that it has adjusted to its “new normal.”)
First reported by Reuters, the contractor report concludes that based on “pending license value”, stricter limitations on chip-related exports “will likely have a high economic impact on Nvidia”; and that there would likely be “moderate economic impact” on Qualcomm. The story goes on to quote a State Department official who indicated that the report was a preliminary draft that “would not have [been] approved … in its current form.”
An Nvidia spokesperson told Reuters: “The China market presents a significant opportunity for the U.S. semiconductor industry. While we are unable to comment on any pending license requests, we work with customers and partners worldwide to comply with all applicable export controls and meet market demand.”
The U.S. government is putting nearly $300 billion into support of U.S.-based semiconductor capacity and R&D, through the CHIPS and Science Act, and also funding (though not the complete estimated costs of) the so-called rip-and-replace bill that helps to subsidize the cost of replacing equipment and services from blacklisted Chinese vendors in small networks. Demand and wait times for chips are still high and aren’t expected to ease until perhaps the second half of this year, but the prospect of not being able to sell to large buyers in the Chinese market could have long-term implications for the U.S. chip market—and for suppliers in other markets where governments are also seeking to bolster their domestic chip independence.
As reported by The New York Times, the U.S. is having at least some success in its pressure campaign to get other countries to limit both chip exports to China as well as the sale of equipment used to make chips. Japan and the Netherlands—which is the only source of advanced, extreme ultraviolet lithography (EUV) machines for chip-making—have agreed to join the United States to limit exports of chips and machinery to make them. That agreement has not been made public, the Times reported. There are also expected to be economic impacts to domestic firms in both countries as a result of cutting off those sales relationships.
