The geopolitical tensions surrounding the semiconductor industry are intensifying due to conflicts between the U.S. and China, as recent actions by both nations signal the importance of this technology sector to their respective economies.
Nvidia, the major chip manufacturer known for its AI processors, is under renewed scrutiny from American authorities and facing challenges from the Chinese government. According to The Information, the U.S. Department of Commerce has requested Nvidia to investigate how its products have been ending up in China, especially amid tight export controls. Companies like Super Micro and Dell incorporate Nvidia’s chips in their products, which raises concerns about compliance with U.S. regulations. Following these developments, Nvidia instructed these distributors to perform spot checks on their Southeast Asian customers, but reports indicate those attempting to smuggle chips have largely evaded detection.
The stakes are high, as Nvidia's adherence to export control restrictions has placed it at the core of the existing U.S.-China trade conflict. The Biden administration’s recent actions, such as restricting technology exports to 140 Chinese companies, aim to prevent China from advancing its chip technology, particularly those potentially used for military applications. This tightening of control reflects broader efforts to limit China's access to advanced technology.
Despite these efforts, Reuters reported findings indicating Chinese universities and research institutions successfully acquiring these banned Nvidia chips through resellers, raising questions about the effectiveness of U.S. export controls. Also, it's notable the act of buying and selling U.S. chips remains within legal bounds, driven by the immense demand for high-quality Nvidia products, which lack adequate local alternatives.
On the other hand, China has retaliated against the U.S. measures by launching investigations against Nvidia for potential antitrust law violations connected with its acquisition of Mellanox Technologies, an Israeli-American company. This investigation is probing potential breaches of commitments related to access conditions for GPU accelerators and networking equipment and could highlight anti-competitive practices.
Adding fuel to the fire, China has implemented strategic counters against the U.S. by enforcing export bans on rare minerals, such as gallium and germanium, materials integral to semiconductor manufacturing. Such actions have only escalated tensions, leading to sanctions affecting numerous U.S. defense firms and executives.
Further complicity is seen within the semiconductor industries of Korea, which are grappling with the fallout from the intensifying chip war. According to reports from The New York Times, this conflict has urged the Korean semiconductor industry to reduce its reliance on China, particularly as the U.S. investigates China’s alleged dumping of older-generation chips at low market prices. The U.S. Trade Representative recently announced inquiries under the Trade Act concerning China's strategies to dominate the semiconductor market.
The focus of the U.S. investigation is primarily on foundational semiconductors, which are integral across various sectors, including defense, telecommunications, and medical devices. These chips, though not technologically advanced, are quintessential to numerous everyday appliances and machinery, thereby underscoring their significance.
U.S. officials claim evidence of China's ambitions to not only dominate their domestic market but to also capture global influence within the semiconductor industry, employing anti-competitive tactics. They argue this puts American workers and economic security at risk, especially as they observe Chinese firms monopolizing significant sectors post the influx of cheap products created from heavily subsidized manufacturing practices.
Responding to U.S. concerns, the Chinese Ministry of Commerce criticized the investigation as hypocritical, pointing to the substantial subsidies supporting the U.S. semiconductor industry. They affirmed their commitment to defending national interests and hinted at possible retaliatory measures.
The exacerbation of the chip war has led experts to advocate for strategic revisions among Korean semiconductor companies, which have increasingly relied on China for production infrastructure. Professor Kwon Seok-joon emphasized the need for Korea to secure its domestic supply chain to mitigate risks associated with external dependencies, particularly as the U.S. moves to impose tariffs on Chinese semiconductors. Such tariffs might impact products manufactured within Korea's facilities situated in China.
The industry-wide focus shifts, especially as the Chip 4 alliance—comprising the U.S., Japan, and Taiwan—is not enough to shield Korea from the impending market threats posed by competitively priced Chinese memory chips.
Overall, the current climate suggests increasing fragmentation within the semiconductor supply chains, marked by protective measures and nationalistic policies from both the U.S. and China. The stakes are not merely about chip technology but encompass broader geopolitical maneuverings, with countries racing not only for technological supremacy but for economic resilience against one another. The ramifications of these tensions will resonate through international markets, shaping the future of global commerce and technological advancement.