US chip restrictions on China would hurt long-term business, Nvidia

Nvidia said that the imposition of further US restrictions on the sale of advanced chips to China would result in the permanent loss of a business opportunity over the long term, although the industry giant expects little near-term impact on its financial performance.

Nvidia is already prohibited from exporting its high-end artificial intelligence-focused chips to China, the largest semiconductor market in the world. However, it has been selling less powerful and restriction-skirting chips, such as its A800 GPU, used for AI and data centre applications.

During an earnings call after releasing strong quarterly results on Thursday, Nvidia chief financial officer Colette Kress addressed reports that the US is considering imposing more sanctions on chip exports to China.

“Given the strength of demand for our products worldwide, we do not anticipate that additional export restrictions on our data centre graphics processing units (GPUs) would have an immediate material impact on our financial results,” said Kress.

“However, over the long-term, restrictions prohibiting the sale of our data centre GPUs to China, if implemented, will result in a permanent loss of an opportunity for the US industry to compete and lead in one of the world’s largest markets,” she added.

The comments are the latest example of American chip makers highlighting commercial interests as Washington moves ahead with its strategic containment of China’s access to imported high technology on national security grounds.

Nvidia relied on China for about a fifth of its revenue in its latest fiscal year, and reported that its revenue from data centres in China accounted for about 20 to 25 per cent of that total last quarter.

Nvidia CEO Jensen Huang has previously highlighted the importance of China’s semiconductor market, and reportedly joined other executives from Intel and Qualcomm in a visit to Washington last month to argue for a pause in further export controls.

Meanwhile, China’s technology giants are scrambling for Nvidia chips that are vital for next-generation AI applications, with vendors resorting to smuggling and other channels to source the much-needed Nvidia products.

In a recent trip to the Huaqiangbei market in the southern Chinese tech hub of Shenzhen, a vendor of electronics components, who declined to be identified, said that the asking price for the A100 chip ranged between 110,000 and 120,000 yuan (US$16,666) and the price was still on the rise amid tight supply and strong demand.

The first round of chip restrictions came late last year, with the US Commerce Department barring sales to China of certain advanced semiconductor-making equipment and chips used in AI applications without a licence.

The restrictions followed up on the Biden administration’s 2022 Chips and Science Act, which restricts American chip manufacturers that accept federal subsidies from investing in manufacturing facilities in China.

The US administration has stated that the measures are designed to boost US competitiveness and innovation and protect national security. Meanwhile, Beijing has condemned the measures as malicious and in violation of global trade rules.

During her comments on Thursday, Kress said that the US’s current chip regulations were already “achieving the intended results”.

Nvidia’s latest quarterly results saw record revenue of US$13.51 billion, up over 100 per cent from the same period a year ago, beating expectations for a third straight quarter.

The California-based company has managed to overcome a broader slump in the traditional semiconductor sector, benefiting from this year’s AI boom, with its share price more than tripling in value so far this year.

The company’s solid financial performance also boosted Asian semiconductor stocks on Thursday, with suppliers including South Korea’s SK Hynix, Japan’s Advantest, and Taiwan Semiconductor Manufacturing Co all seeing their shares jump. South China Morning Post