US vs China Tech-War: China Bans US chips In Government Systems

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China accounted for a significant portion of Intel’s sales in the previous year, representing 27% of its $54 billion in revenue, and 15% of AMD’s $23 billion in sales. 

The US-China tech conflict has intensified with China’s decision to ban US microprocessors like Intel and AMD from government systems, putting $74 billion of American tech revenue in jeopardy. 

China is urging government institutions to shift from US tech giants like Intel, AMD, and Microsoft to domestic alternatives, posing a financial threat to American companies. US firms could lose up to $74 billion in revenue if China successfully transitions away from their products. This is part of a broader tech war between the US and China, with both nations competing for supremacy in fields like artificial intelligence, semiconductors, and software. The updated policy also aims to ‘marginalise’ Microsoft’s Windows OS and foreign-produced database software in favour of domestic alternatives.

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The US has been tightening the criteria for China to access US AI chip technology. The US commerce department officially announced that they would continue to do so. Just days after this ban, the US extended the semiconductor export restriction on China to laptops containing those chips too. The restrictions were introduced in October 2023.

Beijing’s procurement reforms are part of the ‘XinChuang’ or ‘IT application innovation’ national strategy, aimed at achieving technological self-reliance in the military, government, and state sectors. State-owned enterprises have been directed to switch to domestic technology providers by 2027 and are required to submit quarterly reports on their IT system modernization progress with limited allowance for foreign technology.

US chip

The shift towards domestically produced hardware will negatively impact US companies in China, including major PC processor manufacturers like Intel and AMD. China accounted for a significant portion of Intel’s sales in the previous year, representing 27% of its $54 billion in revenue, and 15% of AMD’s $23 billion in sales. 

In December 2023, China unveiled its first-ever list of ‘safe and reliable’ processors and operating systems developed by Chinese companies, including chips from Huawei and Phytium, both blacklisted by Washington. Chinese processor manufacturers are using a mix of chip architectures, including Intel’s x86, Arm, and indigenous designs, while operating systems are based on open-source Linux software.

The $74 billion at risk underscores the urgency for US tech firms to adapt to China’s homegrown revolution. Companies can mitigate risks and capitalise on emerging opportunities in the world’s largest market by embracing innovation, diversification, and strategic partnerships. However, achieving sustained success will require resilience, foresight, and a willingness to navigate geopolitical complexities with agility and adaptability.

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