In another step aimed at curbing China’s technological progress, the U.S. Department of Commerce is restricting shipments to China of advanced graphics processing units (GPUs) designed by U.S. companies NVIDIA and AMD. decided. The U.S. government has said it is concerned about potential military uses for these products.
A GPU is a type of integrated circuit used for generating graphics and video images, high-performance computing, and accelerating artificial intelligence (AI) and machine learning. Both NVIDIA and AMD are based in California and are number 9.th and 10th World’s largest semiconductor companies ranked by 2021 revenue.
Shares of both companies plunged NVIDIA on news of the sanctions. After dropping 12% during the day, NVIDIA’s stock closed down 7.7% on Sept. 1. AMD ended trading down his 3.0%. Both stocks fell further in after-hours trading.
But let’s put the news in a broader context. Nvidia is down 59.8% from his 52-week high (the highest in the past year), while AMD is down 49.9%. Both stocks peaked in November last year.
Applied Materials, the largest maker of semiconductor manufacturing equipment, fell 2.4% on Sept. 1, down 45.0% from its 52-week high. Intel fell just 0.5% on Sept. 1, but is down 43.6% from its 52-week high. The SOX Semiconductor Index has fallen 35.5% from its December peak.
In the short term, the new restrictions on NVIDIA and AMD are just the latest in a string of negative signals that have ended the recent semiconductor bull market.
Looking ahead, however, it became clear that the semiconductor industry could no longer plan to sell its latest and most advanced products in China. A company’s growth prospects and return on investment may decline, and stock prices may test new lows as a result.
On August 12, the Department of Commerce announced restrictions on the export of electronic design automation (EDA) tools to China. Handel Jones, CEO of electronics industry consultancy International Business Strategies, said such restrictions would have “a devastating impact on the world” and would “wreak havoc on the global electronics industry.” ” wrote that it is possible.
“The situation is very serious for China,” Jones said. This is likely to be the case.”
See also: US goes EDA cervical in China’s chip war
In this case, the new sanctions were implemented less than a month later.
But it’s still not a disaster. The Department of Commerce has allowed NVIDIA to continue exporting his A100 GPUs to support US customers and transfer technology.
Until September 1, 2023 for the development of new H100 devices for China.
But it created a lot of uncertainty. NVIDIA warns that revenue impact could reach hundreds of millions of dollars. AMD doesn’t seem too concerned, at least not yet.
EDA tools and GPUs aren’t the only products subject to recent US export controls. On Aug. 12, the Commerce Department also imposed restrictions on semiconductor substrates made of gallium oxide and diamond, and pressure gain combustion (PGC) technology that improves gas turbine performance.
The agency’s Bureau of Industry and Security (BIS) said in a press release:
- “Gallium oxide and diamond are materials that allow the semiconductors that use them to function under more demanding conditions, such as higher voltages and higher temperatures. Devices utilizing these materials have military potential. raise it significantly.
- “PGC technology has great potential for ground and aerospace applications, such as rockets and hypersonic systems.”
Alan Estevez, Undersecretary for Industry and Security, said, “Technological advances that allow technologies such as semiconductors and engines to operate faster, more efficiently, for longer and in more demanding conditions will benefit both commercial and military industries. It could be a game changer in a situation like this.”
Subsequently, on August 23, BIS released the following statement:
The U.S. Department of Commerce, through the Bureau of Industry and Security (BIS), has added seven Chinese space, aerospace, and related technology entities to its Entity List, tightening access to the following covered goods, software, and technology: issued a restricting final rule. Export Administration Regulations (EAR). These seven entities are intended to acquire and attempt to acquire items of U.S. origin in support of activities contrary to U.S. national security and foreign policy interests, particularly the military modernization efforts of the People’s Republic of China (PRC). was added to the entity list. The move has led the Department of Commerce to list nearly 600 Chinese entities on its entity list, of which more than 110 have been added since the Biden administration took office. ”
What once might have looked like a precisely targeted rifle approach to China sanctions now looks like a shotgun blast.
The cynical may wonder when the U.S. government will pressure New Zealand to cut its dairy exports so that China’s youth do not grow up to become powerful soldiers. The question is when and how China will retaliate.
Follow this writer on Twitter: @ScottFo83517667