(JW Insights) May 25 -- The chief executive of Nvidia, the world’s most valuable semiconductor company, has warned that the US tech industry is at risk of “enormous damage” from the escalating battle over chips between Washington and Beijing, reported Financial Times on May 24.
Jensen Huang said US export controls introduced by the Biden administration to slow Chinese semiconductor manufacturing had left the Silicon Valley group with “our hands tied behind our back” and unable to sell advanced chips in one of the company’s biggest markets.
At the same time, he added, Chinese companies were starting to build their own chips to rival 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 Taiwanese-American executive warned US lawmakers to be “thoughtful” about imposing further rules restricting trade 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.
Huang added that blocking the US tech industry’s access to China would “cut the Chips Act off at the knee”, referring to the Biden administration’s $52bn funding package to encourage construction of more semiconductor manufacturing facilities — known as “fabs” — in the US, according to Financial Times.
“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 embedded itself at the centre of a global race to develop a new generation of AI tools, becoming the primary source of chips that are used to train the “large language models” that power chatbots such as OpenAI’s ChatGPT.
The California-based company has been blocked from selling its most advanced chips — the H100 and A100 series — to Chinese customers since August when the US imposed export controls on technology used for AI. Nvidia has been forced to reconfigure some of its chips to comply with US rules limiting the performance of products sold in China.
Huang said China made up roughly one-third of the US tech industry’s market, and would be impossible to replace as both a source of components and an end market for its products.
“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.”
China, including Hong Kong, accounted for more than a fifth of Nvidia’s sales in its latest financial year ending January 2023, according to its annual report, while Taiwan represented more than a quarter, said the report from Financial Times.
Nvidia reported first-quarter earnings for its fiscal 2024 on May 24, with a stronger-than-expected forecast that drove shares up 26%. Jensen Huang said the company was seeing surging demand for its data center products amid the rise of accelerated computing and generative AI, according to media reports.
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