The White House isn’t the only one playing hardball.
Beijing just announced it’s launching two major probes into the American semiconductor sector—right as representatives from the US and China meet in Madrid to work out a trade deal.
The Chinese Ministry of Commerce opened an anti-dumping inquiry related to American chipmakers, essentially accusing US companies of pricing analog chips below fair market value and therefore hurting China’s domestic business. The ministry also launched a separate anti-discrimination probe regarding the US’s policies against China’s chip sector.
Semiconductor companies potentially affected by the two new probes fell: Texas Instruments dropped 2.41%, while Analog Devices lost 0.12%, and ON Semiconductor dropped 0.31%.
On top of that, China’s market regulator doubled down on its assertion that the king of all semiconductor companies, Nvidia, violated Chinese antitrust law. Beijing first opened the probe into Nvidia late last year after the firm acquired Israeli company Mellanox back in 2020.
The news could seriously kneecap Nvidia if China continues to bar the semiconductor giant from selling its chips there. Over the past four quarters, Nvidia’s China revenue was $13.5 billion, or 12% of its total global revenue—down from 21% a year prior, according to Barron’s. The company forecast no Chinese revenue in its last quarterly guidance, which it acknowledged will cut its sales by between $2 billion and $5 billion this quarter.
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Zoom out: Semiconductors have become a point of tension in the ongoing geopolitical beef between the US and China. The US government sees China’s AI development as a threat to national security and to its domestic AI dominance, and the White House has been trying to thwart China’s progress by enacting export restrictions. China’s newest investigations come right after the US added 23 Chinese firms to its “entity list”—which imposes restrictions on companies deemed national security risks.
A lot to work out on the remix
Today’s discussion between the US and China is nominally about tariffs, but think of it kind of like when a couple is fighting about a dish left in the sink—it’s clear the issue is about way more than just that.
But one piece of news today showed that the talks may result in a solution after all: US and Chinese negotiators announced they worked out the beginning of a framework for how to deal with TikTok. The WSJ reported that the escalation of the probe into Nvidia was a cover for the TikTok deal so China wouldn’t look like it was playing too nice with the US.
Maybe all the relationship therapy books are wrong, and calculated power moves, not open communication, are the way to resolving conflict.—LB