Chip wars with China risk “enormous damage” to US technology, says Nvidia boss

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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 chip battle between Washington and Beijing.

Speaking to the Financial Times, Jensen Huang said US export controls introduced by the Biden administration to slow Chinese semiconductor The manufacturing had left the Silicon Valley group with its “hands tied behind its back” and unable to sell advanced chips in one of the company’s largest 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.

“Self [China] i can’t buy from . . . the United States, they will build it themselves,” she said. “So the United States has to be careful. China is a very important market for the technology 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 critical infrastructure products by US memory chip maker Micron, a move seen as the first significant retaliation against Washington’s export controls.

The Taiwanese-American executive has warned US lawmakers to be “considerate” about imposing more rules that limit trade with China.

“If we are deprived of the Chinese market, we don’t have a chance for it. There is no other China, there is only one China,” Huang said, adding that there would be “huge damage to American companies” if they were unable to trade with Beijing.

Huang added that blocking US tech industry access to China “would block the Chips Act at its knee,” referring to the Biden administration $52 billion financing package encourage the construction of more semiconductor manufacturing facilities, known as “fabs,” across the United States.

“If the American technology industry requires a third less capacity [due to the loss of the Chinese market], no one will need American fairy tales, we will swim in fairy tales,” he said. “If they’re not careful with regulations, they’ll hurt the tech industry.”

Nvidia has incorporated itself at the center of a global race to develop a new generation of AI tools, becoming the leading source of chips used to train the “large language models” that power chatbots like OpenAI’s ChatGPT.

As enthusiasm for AI grows, Nvidia’s market cap has more than doubled so far this year to about $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 much bigger than its next closest rival, Taiwanese chipmaker TSMC, which is worth an estimated $450 billion.

However, the Californian firm was prevented from selling its most advanced chips, the H100 and A100 series, due to Chinese customers since August, when the United States imposed export controls on technology used for artificial intelligence. Nvidia has been forced to reconfigure some of its chips to comply with US regulations that limit the performance of products sold in China.

Huang said China accounts for about a third of the market for the US tech industry and it would be impossible to replace it as both a source of components and 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 part of its territory. President Joe Biden said the United States would intervene if China took unprovoked military action against Taiwan. Analysts fear such a conflict would lead to a major global disruption in the production of everything from cars to computers.

“In theory we can build chips outside Taiwan, it is possible [but] the Chinese market cannot be replaced. It’s impossible,” Huang said. “So you have to ask yourself which way you want to push it.”

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

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

Huang also reflected on his failed takeover of UK-based chip business Arm due to regulatory hurdles, saying he was “deeply hurt” and that it was no longer “easy for us to invest” in the UK. “I built the first AI supercomputer implementation in England, the Cambridge-1. I will not build another,” he said. “I finished.”

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