Chip wars with China risk ‘enormous damage’ to US tech, says Nvidia chief

Chip wars with China risk ‘enormous damage’ to US tech, says Nvidia chief

The chief executive of Nvidia, the world’s most valuable semiconductor company, has warned that the US tech industry faces “tremendous damage” from an escalating chip battle between Washington and Beijing.

Speaking to the Financial Times, Jensen Huang said US export controls introduced by the Biden administration to slow down Chinese semiconductor manufacturing had left the Silicon Valley group with “hands tied behind their backs. 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 compete with Nvidia’s market-leading processors for games, graphics and artificial intelligence.

“If (China) cannot buy . . . from the United States, they will build it themselves,” he said. “So the United States has to be careful. China is a very important for the tech industry.

US efforts to prevent China from buying or developing advanced chips have become the most aggressive front in a new Cold War between the two powers.

Huang’s comments came just days before Chinese authorities announced a ban on US memory chip maker Micron’s products from critical infrastructure, a move seen as the first major retaliatory action against export controls. from Washington.

The Taiwanese-American executive has warned U.S. lawmakers to be “thoughtful” about imposing new rules restricting trade with China.

“If we are deprived of the Chinese market, we have no contingency for that. There is no other China, there is only one China,” Huang said, adding that there would be “huge damage to American businesses” if they could not trade with Beijing. .

Huang added that blocking the US tech industry’s access to China would “cut the Chips Act at the knee,” referring to the Biden administration’s $52 billion funding package to encourage the construction of more. of semiconductor manufacturing facilities – known as “fabs” – in the United States. .

“If the American tech industry needs a third less capacity (due to the loss of the Chinese market), nobody will need American fabs, we will be swimming in fabs,” he said. . “If they don’t think about regulations, they will hurt the tech industry.”

Nvidia has embedded itself at the center of a global race to develop a new generation of AI tools, becoming the main source of chips used to train the “big language models” that power chatbots such as OpenAI’s ChatGPT. .

As enthusiasm around AI has grown, Nvidia’s market capitalization has more than doubled so far this year to around $770 billion, ahead of its latest earnings report on Wednesday. Its valuation now dwarfs US rivals such as Intel and Qualcomm, each worth nearly $120 billion. Despite a rally among some chip stocks, Nvidia is still far bigger than its next closest rival, Taiwanese chipmaker TSMC, which is worth around $450 billion.

However, 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 United States imposed export controls on the technology used for the AI. Nvidia was forced to reconfigure some of its chips to comply with US rules limiting the performance of products sold in China.

Huang said China accounts for about a third of the U.S. tech industry’s market and it would be impossible to replace it both as a source of components and as an end market for its products.

Most of the world’s advanced chips – including those from Nvidia – are made in Taiwan, which Beijing claims as its territory. President Joe Biden has said the United States will intervene if China takes unprovoked military action against Taiwan. Analysts fear such a dispute could lead to a serious global disruption in the production of everything from cars to computers.

“We can theoretically build chips outside of Taiwan, it’s possible (but) the Chinese market can’t be replaced. It’s impossible,” Huang said. “So you have to ask yourself which direction do you want to push it.”

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

The numbers reflect the “billing location” of its customers, which could include contractors who then sell to “end customers” in other markets. Based on last year’s figures, more than $12 billion in Nvidia’s annual revenue — nearly half of its total — could be at risk from any potential conflict in the region.

Huang also spoke about the failure of his takeover of British chip company Arm due to regulatory hurdles, saying he was “deeply hurt” and it was no longer “easy for us to move forward”. ‘invest’ in the UK. “I built the first implementation of the AI ​​supercomputer in England, the Cambridge-1. I’m not going to build another one,” he said. “I’m done.”

Join FT reporters and a colleague from Nikkei Asia for a subscriber-exclusive webinar on the US-China tech war on May 25 at 12:30 BST and ask your questions to the panel. Register for your free subscriber pass.

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