Increased Involvement of the U.S. Government in Export Activities
The recent US-China agreement on chip exports and licensing fees could have significant consequences beyond the semiconductor manufacturing sector. This agreement, which affects key industries heavily dependent on advanced chips and AI technologies, is poised to impact a wide range of sectors, from artificial intelligence and data centers to consumer electronics, automotive, renewable energy, and healthcare.
AI and Data Centers: A Boom Driven by Advanced Chips
The AI boom creates a strong demand for advanced logic and memory chips used in data centers and AI applications. Restrictions or licensing fees on chips could influence AI development and deployment globally, potentially altering the technological landscape.
Consumer Electronics and Computing: Disrupted Supply Chains and Increased Costs
Devices like smartphones, laptops, and other electronics rely on semiconductors. Trade tensions and export controls may disrupt supply chains and increase costs for companies manufacturing these products.
Automotive Industry, especially Electric Vehicles: Rising Production Costs
Increasing tariffs on battery parts, EVs, and lithium-ion batteries (some as high as 100%) could raise vehicle production costs, especially for EV manufacturers dependent on advanced semiconductors and battery components sourced from China.
Renewable Energy and Solar Power: Potential Ripple Effects
Tariff increases on solar cells (up to 50%) and critical minerals used in energy technologies suggest a potential ripple effect on the renewable energy sector.
Rare Earths and Critical Minerals Supply Chain: Vital Materials at Risk
China’s rare earth export controls in response to US tariffs affect materials vital for a broad range of electronic goods and high-tech industries. The US is investing heavily to reduce reliance, but pricing and availability remain risks.
Healthcare and Medical Devices: Supply Chain Vulnerabilities
Tariffs on medical gloves, syringes, and needles indicate some vulnerability in this sector to supply chain disruptions, potentially indirectly linked to chip technology dependencies in advanced medical equipment.
Global Manufacturing and Supply Chains: Bifurcation and Cost Impact
The bifurcation of markets due to tariffs and export restrictions forces companies to “friend-shore” manufacturing to allied countries, impacting global manufacturing logistics and costs beyond chips themselves.
The US Treasury Secretary, Scott Bessent, has suggested that this model could be extended to other industries, although the potential expansion is hypothetical and not yet confirmed. In an interview on US broadcaster Bloomberg TV, Bessent made this suggestion.
The agreement with Nvidia and AMD is unique and unprecedented. Initially, Nvidia was prevented from delivering its H20 systems to China due to the tightened rules by Trump's administration in the spring. However, the turnaround came after persuasion by Nvidia CEO Jensen Huang.
Under the agreement, the US government is receiving a 15 percent share of sales of AI chips from Nvidia and AMD to China. The agreement pertains to exports to China and is not limited to AI chips, as indicated by the 15 percent share of sales.
President Donald Trump initially demanded a 20 percent share from Nvidia CEO Jensen Huang. Nvidia is the market leader in the AI chip market.
The model of fee-based export licenses could potentially expand over time, although the extension to other industries is only a suggestion at this point. The agreement between the US government and chip giants Nvidia and AMD for fee-based export licenses to China is a significant step towards regulating semiconductor exports to China.
The unique agreement between the US government and chip giants Nvidia and AMD, which results in a 15% share of AI chip sales to China, indicates the potential application of fee-based export licenses in the finance sector, possibly leading to revenue for the US Treasury.
The influence of such licensing fees on other financially significant industries, such as the finance sector, could reshape their operations and profit distribution, mirroring the impact on the semiconductor industry.
