China remains an important market for US chipmakers amid rising tensions

The United States passed a series of export controls starting in October 2022 aimed at restricting China's access to advanced chip technology, especially that used in artificial intelligence applications.

“China remains an important market for U.S. chip manufacturers, and U.S. restrictions on selling advanced AI chips to China are specifically designed to allow most U.S. companies to continue selling most types of chips to Chinese customers,” says Chris Miller, author of The Chip War. “He told CNBC.

Semiconductors, used in a wide range of products, from smartphones to electric cars, have become a top priority for governments globally.

According to data from technology consulting firm Omdia, China consumes nearly 50% of the world's semiconductors because it is the largest consumer device assembly market.

US chipmakers, which have a technological lead over Chinese competitors, have been able to capitalize on this demand as US export restrictions focus on some very specific products.

William B. said: “There are still a lot of 'cutting-edge' chips with all sorts of permissible use cases that are good to go as US-based chip companies have the dominant, leading advantage,” said Bailey, senior technology, media and telecommunications analyst. at Nasdaq IR Intelligence.

U.S. chipmakers, even those with a majority of their business in the United States, such as Micron Technology, AMD, and Nvidia, have strived to serve their Chinese customers even in the face of export controls.

When the first wave of US restrictions took effect in late 2022, Nvidia and Intel designed modified versions of their AI chip products for the Chinese market.

A year later, the United States updated its export rules to address these perceived 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 US-sanctioned 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 Chinese market.

AMD has also designed an AI chip for China but will need to apply for an export license after failing to get past US regulators last month.

The CEOs of Intel, Qualcomm, and Nvidia have done just that It said I was part of a group that planned to lobby Washington against tougher restrictions on chips in July last year.

These companies are also members of the Semiconductor Industry Association, a major American semiconductor trade organization Issue a statement Around the same time, he asked for an easing of tensions and a halt to further sanctions due to the importance of the Chinese market for local chip companies.

In light of the tough political stance taken by the United States, China also responded in kind. In May last year, chips produced by the US company Micron were banned from China's critical information infrastructure after an audit by the country's Cyberspace Administration failed.

Micron is building a new assembly and testing 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. They added that production is expected to begin in the second half of 2025.

China is striving for self-reliance by building a domestic semiconductor industry in response to countries such as the United States and the Netherlands that limit its access to advanced technology.

Beijing has allocated billions of yuan in subsidies to chip companies in an attempt to boost domestic manufacturing.

Analysis of the Huawei Mate 60 Pro smartphone Technical insights It unveiled an advanced chip made by SMIC, China's largest chip maker. The smartphone is also said to be equipped with 5G connectivity – US sanctions aimed at preventing Huawei from accessing this technology.

Miller said the Chinese government is “increasingly focused” on convincing its companies to buy chips made domestically. “Unless foreign companies have a significant technological advantage over local Chinese competitors, they will lose market share in China.”

However, Felix Li, an equity analyst at Morningstar, said he does not expect a “supply chain overhaul” even as Chinese companies innovate legacy chips found in everything from household appliances to medical equipment.

Older chips are usually mature or low-end semiconductors. US Commerce Secretary Gina Raimondo said About 60% of these chips are manufactured in China.

According to Brady Wang, associate director at Counterpoint Research, in the AI ​​GPU market segment, US companies such as Nvidia and Intel are estimated to have a technological lead of about three to five years over Chinese competitors.

“We believe that China can still build its own domestic GPU supply chain for specific market segments, but the quantity will be limited, and the cost will be much higher,” he added.