Why American semiconductors may suffer as a result of US tech restrictions on China

Three years ago, when the US initially forbade the sale of specific tech items to the Chinese tech company Huawei, it crippled a once-proud national champion and sent reverberations across the US chip sector. Leading American chipmakers reported a median revenue decrease of 4% to 9% in the quarters that followed that export restriction in May 2019.

The most recent technological restrictions established by the Biden administration pose a threat of accelerating such losses and destabilizing the world semiconductor market. And it won't only be Chinese businesses that suffer because of the new laws.

According to Edith Yeung, Race Capital General Partner, there might be significant effects on other US businesses if China truly wants to be as aggressive as the US and react (video above). This has an influence beyond how much money Intel (INTC), Qualcomm (QCOM), or NVIDIA (NVDA) make.

With between 45% and 50% of the worldwide semiconductor business, the US has long been the industry leader. Although China accounts for around 75% of the world's semiconductor sales, its leadership has been based on the demand for its goods on a worldwide scale.

Approximately 25% of the world's semiconductor demand in 2018 came from just Chinese device manufacturers, according to a Boston Consulting Group report (BCG).

More than a simple precautionary measure

With the Biden administration's extensive technological regulations, which aim to halt China's semiconductor development and severely curtail crucial technology exports from the US, that innovation cycle is in danger of being upended.

Before the administration's pronouncements, National Security Advisor Jake Sullivan remarked, "Technology export limits can be more than just a prophylactic tool." "They can be a new strategic asset in the US and partner toolset to impose costs on enemies, and even over time weaken their battlefield capabilities," the report reads. "If applied in a fashion that is strong, durable, and comprehensive."

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