US-China Chip War Heats Up, Nvidia Probed, What’s Next?

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Weeks after Beijing announced the ban on critical materials exports to the US as a response to the Biden Administration’s restriction on semiconductor production equipment and software and added more than 140 Chinese entities to the Entity List, China initiated an anti-trust investigation on Nvidia. What’s the likely move of the US and what’s the impact of China’s counteractions so far?

Notably, on the same day that Beijing announced the critical materials export curbs, four industry associations in China immediately warned that Chinese companies should be wary of purchasing US chips, which they claimed "are no longer safe."

Interestingly, the US Department of Commerce’s Bureau of Industry and Security (BIS) also released a report on the use of mature-node semiconductor chips, or legacy chips, in supply chains that directly or indirectly support US critical infrastructure. The report, leveraging data collected under the Defense Production Act (DPA), highlights significant issues in semiconductor supply chains. Many companies selling products with legacy chips lack visibility into their origins, with half unable to determine if China-based foundries make their chips. Despite this, over two-thirds of US companies' products contain chips from China, though these are a small fraction of the total chips used. Additionally, China's capacity expansion is creating pricing pressures that could undermine the competitiveness of U.S. chip suppliers.

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