Fnew events in the technology calendar creates as much buzz as the release of the latest iPhone. On September 12, Apple boss Tim Cook unveiled what he called “truly incredible” new devices. Yet it was an earlier, quieter launch of a rival gadget that left the tech world stunned. At the end of August, without warning, Huawei presented the Mate 60 Pro. As the first smartphone entirely made in China that can operate 5g networks, it was an instant success. The processors inside were made by SMIC, the Chinese chip manufacturing champion. This is exactly the type of technology that America is trying to prevent Huawei and other Chinese companies from getting their hands on.
If being overshadowed by a Chinese rival wasn’t enough to sour Apple’s mood, a few days later news broke that some Chinese government departments and state-owned companies might ban iPhones. The American giant’s share price fell 6%, wiping around $200 billion from its stock market value.
The direct impact of a ban on Apple would be minimal. A tiny fraction of China’s roughly 7 million civil servants can afford iPhones, estimates Jefferies, an investment bank. Yet the rumors – and they still are – indicate that even Apple, whose relations with China have long been warm, is not invulnerable to geopolitics. What’s more, China’s targeting of America’s most valuable company, combined with SMICWashington’s new chipmaking prowess could prompt Washington hawks to step up anti-China controls. The Chinese could react, and so on on the escalation ladder. No wonder investors are scared.
This is what has shaken semiconductor companies the most so far. Last year, the United States restricted exports to China of advanced chips and the tools needed to make them. Nvidia, specialist in processors for artificial intelligence (AI) whose market value exceeded $1 trillion this year, said trade controls would reduce its quarterly revenue by 6%. Tighter controls could hurt its data center sales AI fleas. Between 20 and 25% of them go to China. In August, Nvidia said the US government controlled exports of its most advanced products. AI chips in the Middle East, perhaps to prevent Chinese companies from obtaining chips there.
Chipmakers have also suffered from Chinese retaliation. In May, China banned memory chips made by Micron from certain infrastructure projects. The Idaho-based company said this could reduce its annual revenue by more than 10%. Talk of banning Apple has driven down the stock prices of the iPhone maker’s U.S. chip suppliers, such as Cirrus, Qualcomm and Skyworks. Chinese regulators have also delayed approval of large U.S. acquisitions, points out Stacy Rasgon of Bernstein, a brokerage. As a result, in early August, Intel, another chipmaker, abandoned its attempt to buy Tower Semiconductor, an Israeli company, for $5.4 billion.
The situation for American manufacturers of chipmaking tools is more mixed. MAMA Research and Applied Materials, two of those companies, each warned last year of a $2 billion drop in sales in 2023, the equivalent of about 10% of their revenue. But some of that could be offset by rising sales of equipment used in making less advanced semiconductors. American companies can continue to sell them to China, which is stockpiling them while it still can. According to New Street Research, an analyst firm, Chinese purchases of such tools quadrupled between 2019 and 2023.
Further escalation could harm US tech giants, not just Apple. According to The Wall Street Journal, President Joe Biden’s administration is considering restricting China’s access to U.S. cloud computing. That would put Alphabet, Amazon and Microsoft in the crosshairs.
In the eyes of the Americans, the biggest losers were Huawei, SMIC and other Chinese tech titans. They certainly suffered. But today, they benefit from techno-nationalism which is a by-product of geopolitical conflicts. Huawei’s share of domestic smartphone sales rose from 7% to 13% in the year to the second quarter of 2023, estimates IDC, a research company. The new 5g The device, which sold out in two days, could strengthen it even further, just as an iPhone ban would. Huawei also benefits from SMICThe country’s efforts to innovate around U.S. controls. In the week following the Mate 60 Pro’s launch, the chipmaker’s stock price jumped 10%. This is not quite what the China hawks had in mind in Washington. ■
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