For those who came in late, the US government thought that it would be a really good way to restrict China's military potential by denying access to government-controlled entities leading processor designs, chip development, and production capabilities. It has allocated billions of dollars to US chipmakers to make the companies set up shop in the US.
However, there are signs that this has had a negative effect on US chipmakers and wiped billions of dollars from the semiconductor industry's global market value. Some US companies are already restricting access to certain China-based companies to their products and services, whereas others are waiting before the U.S. government makes its restrictions official, or their cheques from the US government clear.
The issue is less about where the chips are made, which is what has concerned the US government and more the fact that China consumes loads of semiconductors and produces loads of chips in the country. China must adopt the latest technologies designed in the country and elsewhere to support its economic and humanitarian development.
The Biden administration wants to make things worse with more severe sanctions against China's chip sector in the coming weeks or months. The idea is to get Chinese contract chipmaker SMIC to stop making chips using its 14nm-class fabrication technology (and thinner) nodes and YMTC to cease advancing its 3D NAND memory. Although to be fair, this cunning plan is just continuing what Donald Trump did. Trump while being a friend of Tsar Putin and wanting to pull the US out of NATO was very worried about the Chinese.
But large chip companies have seen their values drop down the loo as investors have been expecting slowing demand for chips, but this anti-Chinese plan generally has made chip companies less valuable.
As yet it is unclear if the American government has the power to restrict licensing of Arm chip designs to customers in China, but it could confine licensing of certain portions of designs developed in the US. Also, the U.S. administration can restrict the usage of American chip development tools to create chips for certain Chinese entities by contract chip designers like Alchip.
Recently the US government barred sales of AMD's, and Nvidia's high-performance compute GPUs to any customers in China, including cloud companies like Alibaba and Baidu, which could have lowered Nvidia's quarterly revenue by up to $400 million if the government did not allow the company to fulfill existing orders and continue to work with Chinese manufacturing partners for a while.
The US government does not want American companies to sell Chinese entities supercomputing-grade hardware that could allow building machines with the performance of over 100 FP64 PetaFLOPS or over 200 FP32 PetaFLOPS.
What the cunning plan also assumes is that the Chinese will just sit on their hands and cry that the US has taken its tech toys away. What is more luckly is that the Chinese government will chuck a ton of investment money developing its own technology which is completely out of the hands of the US. The result would be that China eventually catches up to the West and flogs its chips to US enemies such as North Korea, Iran, and Russia and limits Western chip sales areas.
Basically, any embargos will hurt China in the short term, but in the long term it will bite the US a lot harder than being nice now. While two White House administrations have failed to see this bigger picture, it appears that Wall Street has and shares the likes of Intel, Nvidia and AMD are dropping even as the government is throwing money at them.