New chip export ban could cause ‘geopolitical economic war’

The announcement of new U.S. export restrictions on AI chips to China could turn into a ‘geopolitical economic war’, say analysts from Wall Street. New reports from the U.S. Department of Commerce indicate that there may soon be greater export restrictions on the most advanced semiconductors with artificial intelligence capabilities, which would have significant implications for China’s economic growth and military advancement, which the West fears.

The Department of Commerce has already announced that it will halt shipments of chips produced by Nvidia and other chip manufacturers to customers in China as early as July. Nvidia, Micron, and AMD are among the American chip manufacturers caught in the crossfire between China and the Biden administration. In September, Nvidia stated that U.S. officials had requested the company to stop exporting two top-tier computing chips for artificial intelligence to China.

A few months later, Nvidia, led by Jensen Huang, announced that it would offer a new advanced chip called A800 in China to comply with export control rules. The company also modified its flagship H100 chip earlier this year to meet regulations.

However, the new restrictions being considered by the department would prohibit the sale of even A800 chips without a special export license for the U.S., the report adds.

Military Industry

The new restrictions are not only targeting China’s future economic growth but also very specific components for military artificial intelligence, says Ted Mortonson, sector strategist for the technology department at Baird.

All new restrictions would be in addition to those announced last year for machines used to produce the most advanced chip technologies.

No one knows how deep these restrictions will go, but I think it is very clear that it has now become economic policy not to allow China to have our most advanced technology, Mortonson said.

The semiconductor industry has ‘burned’ this year due to the hype around artificial intelligence. Investors have been pouring money into companies like Nvidia and AMD.

Mortonson says that China represents 25 to 30 percent of total revenue exposure for both companies.

It is unclear how China would react to the new restrictions, but Mortonson says investors can expect retaliation from Beijing against American companies.

China controls a large part of the supply of other products in the U.S. and will certainly not sit idly by. They will retaliate against the U.S. in other ways, he said.