Stricter Regulations on China’s Tech Sector Pose Risks for NVIDIA

As the Biden administration prepares to impose stricter regulations on China’s technology sector, NVIDIA finds itself facing significant risks. These measures, aimed at dividing the global chip supply chain, could have far-reaching implications.

In addition, the sale of AI chips to China may be prohibited without explicit export licenses. These potential restrictions are concerning for NVIDIA and other semiconductor companies, as they might impact their revenue and sales in China.

Biden Administration’s Plans and Potential Impact

Wccftech, a tech media outlet, reported (via) that the Biden administration is considering banning the sale of AI chips to China without an export license. This ban may extend to cloud services provided to Chinese AI companies that utilize data center chips to bypass restrictions on advanced semiconductors.

If implemented, these measures would supplement the export control regime imposed by the US Commerce Department in September 2022, which already impacted NVIDIA’s A100 and H100 chips, as well as AMD’s MI250 chips.

NVIDIA CFO EXPECTS NO MATERIAL CHANGE TO EARNINGS FROM RULES https://t.co/sGVWWN7qBS

— *Walter Bloomberg (@DeItaone) June 28, 2023

NVIDIA acknowledges that China accounts for a significant portion of its data center-related sales, approximately 20 to 25 percent. However, the company asserts that it expects no significant impact on its earnings due to the forthcoming changes in chip export controls.

Bank of America analyst Vivek Arya suggests that if export restrictions on A800 and H800 data center chips to China are enforced, it could affect 7 percent of NVIDIA’s total revenues and 10 percent of its data center sales.

Concerns from ASML

ASML, the primary manufacturer of extreme ultraviolet (EUV) lithography machines, expresses concerns about the practicality of separating chip supply chains. ASML’s executive vice president and chief business officer, Christophe Fouquet, believes that decoupling is not feasible and would be extremely difficult and costly. He emphasizes that retreating to a secluded corner and relying solely on internal capabilities is a challenging concept.

As these regulations develop, the semiconductor industry will closely monitor their implications on global chip supply and market dynamics.

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