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Chip Leaders Head to Washington to Lobby for China Rules Relief
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2023-07-15 08:59
America’s largest semiconductor companies are embarking on a last-ditch effort to head off new curbs on their sales

America’s largest semiconductor companies are embarking on a last-ditch effort to head off new curbs on their sales to China, with senior executives traveling to Washington next week for talks with administration officials and lawmakers.

The chief executive officers of Intel Corp., Qualcomm Inc. and Nvidia Corp. are planning to lobby against extending restrictions on the sale to China of certain chips and the equipment to manufacture the semiconductors that the Biden administration is set to roll out in the coming weeks, people familiar with the matter said.

While they don’t expect to stave off all the actions, the companies are sensing a window of opportunity to convince the Biden team that an escalation would hurt the current diplomatic efforts by the White House to engage Chinese officials and establish a more productive relationship, according to the people, who asked not to be identified because the trip isn’t yet public.

Chip companies are at the center of what has been an escalating row between Beijing and Washington. The US, where the majority of the technology originates, believes that restricting China’s access to it will bolster national security and hold back the Asian nation’s efforts to advance its military capabilities. The companies have argued that being cut off from their largest market will harm their ability to spend on advancing their technology and ultimately undermine US leadership.

Representatives for the three companies declined to comment.

Qualcomm CEO Cristiano Amon gets more than 60% of his company’s revenue from the China region by supplying components to smartphone makers such as Xiaomi Corp. Intel’s Pat Gelsinger, who visited Beijing earlier this month to show off his company’s latest artificial intelligence chips, counts the nation as his biggest sales region. The country provides about a quarter of Intel’s sales. And for Nvidia, run by co-founder and CEO Jensen Huang, China provides about a fifth of revenue.

The Commerce Department in October issued rules that bar semiconductor equipment makers from selling certain tools to China, as well as prohibit the export of chips used in artificial intelligence applications — an announcement that roiled the industry last October.

So far, chip equipment makers such as Applied Materials Inc. have taken the biggest hits to revenue, being forced to knock hundreds of millions of dollars off their projections. But the restrictions, which companies fear will be extended to other classes of chips, are also affecting some makers of devices. Nvidia’s ability to ship its industry-leading artificial intelligence accelerators to China has been curbed by an approval process, costing it sales.

The administration is planning to update and finalize the measures by strengthening what’s already been announced. Last week, Bloomberg reported that the US is using some of its powers to influence overseas companies to further cut off China’s access. ASML Holding NV, one of the biggest providers of chipmaking equipment, is facing tighter restrictions from its home government in the Netherlands and new restrictions from the US, because some of its components are made in America.

In general, the US new rules will also reflect the outcome of negotiations with Japan and the Netherlands, people briefed on the plans said.

Reuters previously reported on the plan for some of the CEOs to meet with US officials.