Chinese chipmakers to see big negatives from Biden’s ‘last dance’- Jefferies

Investing.com– Jefferies expects a major negative impact on China’s chipmaking industry from the Biden administration’s latest round of export controls on the sector- one of the final policies under President Joe Biden before a looming regime change.

Biden’s latest round of export restrictions- which will block advanced foundries such as TSMC (NYSE:TSM) and Samsung Electronics Co Ltd (KS:005930) from making artificial intelligence chips for China- was described as a “very onerous control measure” by Jefferies analysts. 

Chinese companies will now have to undertake extensive documentation and approval processes to order chips from U.S.-linked foundries, presenting the possibility of outright rejection or a prolonged order process. 

Jefferies said the move stands to have a “big negative impact” on China’s GPU/AI ASIC players, given that TSMC and Samsung- which have the most advanced foundry facilities in the globe- will not be able to manufacture chips for the sector. 

While de-speccing is an option- ie running AI chips with fewer transistors- it will make the product less useful, Jefferies said. 

For ADAS/AD players, Jefferies said the impact was less clear, given limited information about transistor counts in the sector. But the new regulations could prevent the sector from advancing technology, giving them a disadvantage against foreign competitors such as NVIDIA Corporation (NASDAQ:NVDA) and Qualcomm Incorporated (NASDAQ:QCOM). 

The restrictions, introduced this week, cap off a string of curbs imposed by the Biden administration against China, to largely block its access to the fast-growing AI industry. It appears likely that incoming President Donald Trump will continue to keep the restrictions in place, given that he has signaled a largely hawkish stance against China. 

Still, Chinese chip stocks rallied on Friday, amid persistent bets that major local foundries such as Semiconductor Manufacturing International Corp (HK:0981) will benefit from increased local demand. China also launched a probe into U.S. chipmakers over grants under the CHIPS act, as well as allegations of dumping.