Chip conflicts with China could do 'enormous damage' to US technology, according to Nvidia's CEO

Jensen Huang advises lawmakers to be 'thoughtful' before placing additional export limits on Beijing.

The CEO of Nvidia, the world's most valuable semiconductor company, has warned that the developing chip war between Washington and Beijing might do "enormous damage" to the US tech industry.

Jensen Huang claimed that US export curbs imposed by the Biden administration to impede Chinese semiconductor manufacture had left the Silicon Valley firm with "our hands tied behind our back" and unable to sell sophisticated chips in one of the company's most important markets.

Simultaneously, he continued, Chinese companies were beginning to develop their own chips to compete with Nvidia's market-leading processors for gaming, graphics, and artificial intelligence.

“If [China] can’t buy from . . . the United States, they’ll just build it themselves,” he said. “So the US has to be careful. China is a very important market for the technology industry.”

The United States' efforts to block China from purchasing or producing sophisticated semiconductors have become the most aggressive front in the two countries' new cold war.

Huang's remarks came only days before Chinese officials put a ban on US memory chipmaker Micron's products from key infrastructure, the first serious retaliation to Washington's export limits.

The Taiwanese-American businessman urged US lawmakers to be "thoughtful" about implementing new trade restrictions with China.

“If we are deprived of the Chinese market, we don’t have a contingency for that. There is no other China, there is only one China,” Huang said, adding that there would be “​​enormous damage to American companies” if they were unable to trade with Beijing.

Blocking access to China for the US tech industry would "cut the Chips Act off at the knee," Huang said, referring to the Biden administration's $52 billion funding plan to support the development of more semiconductor manufacturing facilities, known as "fabs," in the US.

“If the American tech industry requires one-third less capacity [due to the loss of the Chinese market], no one is going to need American fabs, we will be swimming in fabs,” he said. “If they’re not thoughtful on regulations, they will hurt the tech industry.”

Nvidia has positioned itself at the epicentre of a worldwide competition to create a new generation of AI tools, becoming the principal supply of chips used to train the "large language models" that power chatbots like OpenAI's ChatGPT.

As interest in artificial intelligence has surged, Nvidia's market capitalisation has more than doubled this year to roughly $770 billion, ahead of its next earnings announcement on Wednesday. Its valuation now eclipses that of US rivals Intel and Qualcomm, both of which are valued at around $120 billion. Despite a recent increase in several semiconductor companies, Nvidia remains significantly larger than its nearest rival, Taiwanese chipmaker TSMC, which is valued at around $450 billion.

However, since August, when the US put export limitations on AI technology, the California-based business has been unable to sell its most advanced chips — the H100 and A100 series — to Chinese clients. Nvidia was compelled to alter certain of its chips in order to comply with US regulations that limit the performance of goods sold in China.

According to Huang, China accounts for around one-third of the US IT industry's market and would be impossible to replace as a source of components as well as an end market for its products.

The majority of the world's modern processors, including Nvidia's, are manufactured in Taiwan, which Beijing claims as its own. President Joe Biden has stated that if China takes unjustified military action against Taiwan, the US will engage. Analysts believe that such a confrontation would cause significant global disruption in the manufacture of everything from automobiles to computers.

“We can theoretically build chips outside of Taiwan, it’s possible [but] the China market cannot be replaced. That’s impossible,” Huang said. “So you’ve got to ask yourself which way do you want to push it.”

According to its annual report, China, including Hong Kong, accounted for more than a fifth of Nvidia's sales in its most recent fiscal year ending January 2023, while Taiwan accounted for more than a quarter.

The data reflect the "billing location" of its clients, who may include contract manufacturers that sell to "end customers" in other markets. According to last year's calculations, Nvidia's yearly earnings of more than $12 billion — about half of its total — might be vulnerable to any future violence in the region.

Huang also discussed his failed buyout of UK-based semiconductor company Arm, saying he was "deeply hurt" and it was no longer "easy for us to invest" in the UK. "I built the Cambridge-1, England's first AI supercomputer implementation." "I'm not going to build another," he stated emphatically. "I'm done."

By fLEXI tEAM