Recently, China has instituted new guidelines that will phase out U.S. processors in government computers and servers. This move effectively blocks chips from major U.S. companies such as Intel and AMD. The guidelines, which were unveiled on Dec. 26, are now being enforced and will not only impact processors but also Microsoft’s Windows operating system and foreign-made database software. Chinese alternatives are being favored over these foreign technologies, according to a report by the Financial Times.
This decision by China is in line with its efforts to boost its domestic semiconductor industry and reduce reliance on foreign technology. Semiconductors are critical components found in various devices ranging from smartphones to medical equipment. The U.S. and China have been embroiled in a technology war, with the U.S. implementing export restrictions to limit Beijing’s access to key semiconductor equipment and technologies. Washington introduced rules in October 2022 aimed at restricting China’s ability to access or manufacture advanced semiconductor chips amidst concerns about potential military applications.
Impact on U.S. Companies
U.S. chip design firm Nvidia faced new regulations in October 2023 to prevent it from selling advanced AI chips to China. Additionally, Chinese tech companies such as Huawei and SMIC, China’s largest chipmaker, have been sanctioned by the U.S. to restrict their access to advanced technology. SMIC has struggled to obtain critical equipment for the production of advanced chips, such as extreme ultraviolet lithography machines from ASML. As a result of the U.S.-led tech embargo, China’s domestic chip equipment manufacturing firms have seen a significant increase in revenue.
The enforcement of China’s new guidelines further exacerbates tensions between the U.S. and China in the tech sphere. As the two countries continue to battle for technological dominance, the semiconductor industry has become a focal point of contention. With China’s push for self-sufficiency in semiconductor production and the U.S.’s efforts to curb Chinese technological advancement, the global tech landscape is increasingly divided.
Overall, China’s decision to phase out U.S. processors in government computers marks a significant shift in the semiconductor industry’s geopolitical landscape. It underscores the escalating competition between the U.S. and China for dominance in critical technology sectors and highlights the broader implications of this ongoing tech war.