New US chip export ban opens market for local producers

Zhu Shenshen
China chipmaker stocks surge on potential localization opportunities after announcement by Nvidia of restrictions affecting its high-end GPU chips.
Zhu Shenshen

The US government has moved to restrict firms, including Nvidia, from selling to China the high-end GPU chips that are widely used in data centers and artificial intelligence applications, industry sources said on Thursday.

The ban, announced in a Nvidia statement to the US stock market regulator on Wednesday, caused a surge in China domestic chipmaker shares on Thursday based on potential "localization" opportunities.

Similar high-performance chips developed by Chinese firms and considered as potential replacements for US versions were being demonstrated at the ongoing WAIC event in Shanghai on Thursday.

The US has imposed the new license requirement, effective immediately, for any future exports to China and Russia, for potential "military use."

Chinese Foreign Ministry Spokesperson Wang Wenbin said at a regular briefing on Thursday that the ban showed that the US was trying to keep its "technological hegemony" by stretching the idea of national security and using its own scientific and technological advantages to slow the growth of emerging markets and developing countries.

Also on Thursday, Shu Jueting, a spokesperson for China's Commerce Ministry, said at a news conference that China strongly disagrees with recent US actions that "abuse" export control measures to limit exports of items related to semiconductors into China.

The new rules cover Nvidia's A100 and forthcoming H100 integrated circuits, and any future Nvidia products with performances equal to or greater than A100, according to a company statement to the US Securities and Exchange Commission.

Nvidia expects the new license requirements to influence its Chinese business, worth about US$400 million in the third quarter.

"We are working with our customers in China to satisfy their planned or future purchases with alternative products and may seek licenses where replacements aren't sufficient," Nvidia said.

According to media reports, AMD is facing the same new license requirements for China. AMD China declined to comment on the issue.

Prices of both Nvidia and AMD shares fell in the US market in after-trade activity.

New US chip export ban opens market for local producers
Zhu Shenshen / SHINE

A WAIC event patron visits the booth of Biren Technology whose new chip is seen as a formidable replacement for AMD and Nvidia's offerings.

The high-performance GPU chips are mainly used by enterprises such as mobile carriers, energy firms and automotive vendors. The consumer market for gaming and designing won't be influenced, experts said.

In August, Chinese startup Biren Technology released a BR100 with TSMC's 7 nanometer process, demonstrating its potential as a formidable opponent for AMD and Nvidia's offerings.

At the ongoing WAIC event, Biren and Iluvatar Corex displayed their latest AI chips. Previously, Huawei had developed its own AI chips.

With strict external controls and geopolitical uncertainty, "supply chain security" is crucial for the Chinese mainland's chip industry, said CITIC Securities. The US move also presents opportunities for companies to develop "localization" replacements, it said.

Shares in two listed firms, Loongson Technology and Jingjia Micro, dealing in GPU chip and related product development, had risen over 7 percent by noon on Thursday.

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