Why chip CEOs lobbied against Washington?

Intel, Nvidia and Qualcomm were lobbying their government against planned new curbs on the U.S. chip exports to China as executives of the three tech giants on July 17 gathered in Washington to talk about U.S.'s China policy with Secretary of State Antony Blinken and other White House officials, Reuters reported.

On the same day, the U.S. Semiconductor Industry Association also called on the Joe Biden administration to "refrain from further restrictions" on chip sales to China until they finish the assessment of the measures' impact.

With its supply chains widely distributed around the world, the chip industry is highly globalized, which is known to us all. The chip war with China risks "enormous damage" to U.S. tech firms themselves, Nvidia CEO Jen-Hsun Huang told Financial Times in an interview.

"Accounting for over 80 percent of global chip sales, the Chinese mainland has become the world's largest semiconductor market, which strongly supports the supply of electronic products," according to a statement published by the China Semiconductor Industry Association on July 19. Data also shows that semiconductor sales worldwide reached $560 billion, of which China's purchases amounted to $180 billion.

All of three U.S. chip giants, namely Nvidia, Qualcomm and Intel, rely on their sales in China. Specifically, more than 60 percent of Qualcomm's revenue came from the Asian country; for both Nvidia and Intel, this was around 25 percent in 2022.

Further, it was when the highly cyclical chip industry was witnessing a cycle of oversupply that Washington imposed their export restrictions on China. As the pandemic fades, the supply chain and investments of major tech companies have recovered, with the chip shortage even turning into a surplus, especially in South Korea and the U.S., where some chip manufacturers face increasing inventories and declining revenues. They are likely to suffer greater losses unless corresponding countermeasures are introduced.

It's easy to understand why chip CEOs rushed to the White House for talks on China export curbs, given the dire market condition and falling profits. The planned new restrictions will further choke off their access to the world's biggest chip market, which leads to a greater loss of company turnover and profits, which will accelerate their revenue decline, affect future research, investment and innovation, and ultimately weaken their dominant position in the global chip industry.

History has proved that the blockade imposed by the U.S. will hardly suppress other countries' development while damaging its own interests. The U.S. itself also encountered similar technological blockades in the 19th century when the UK government prohibited the export of modern textile equipment – which was high-tech at that time – to the U.S., and neither were British textile technicians allowed to go to the U.S., which aimed at maintaining its tech advantages.

However, the UK's blockade failed to prevent the rise of the American textile industry, let alone change the fate of the British counterpart's decline, from which we may conclude that the blockade policy of "small courtyards and high walls" cannot maintain a country's advantages forever; on the contrary, it may eventually affect faster and better development.

Before it's too late, the Biden administration needs to calm down, listening to the chip companies and the echoes of history, and give up its fantasy of maintaining technological dominance by suppressing China. As President Xi Jinping said during his meeting with Blinken last month, "The vast expanse of the Earth is big enough to accommodate the respective development and common prosperity of China and the U.S."