Chinese Efforts to Exclude American Chip Manufacturers Impact Intel and AMD Stocks

2024-04-12 13:34:00

Intel shares INTEL CORPORATION -3.29% Close:0 Open:36.67 High:36.7 Low:36.04 Turnover:– Page Quote News Graphs Company Profile Recommendations More articles on the subject: and AMD ADVANCED MICRO DEVICES -3.92% Close:0 Open:164.53 High :165.7 Low:161.83 Cycle:– to page quote news graphs company profile recommendations additional articles on the subject: are trading with price drops of up to 4% following reports of Chinese efforts to exclude American chip manufacturers from telecom systems in the country. Senior officials in China have instructed major telecom companies to gradually remove chips from foreign companies from their systems by 2027.

To what extent China will be able to replace Intel and AMD hardware with local alternatives is still unclear, but the quality of local chips has improved and their performance has become more stable. The move appears to be part of a long-term Chinese effort to promote the country’s domestic chip industry.

Already last month it was reported in the US that Intel and AMD chips will be gradually removed from the computers and servers of the Chinese government in favor of local alternatives.

Over the past 12 months, Intel generated about 27% of its revenue from the Chinese market, more than any other single market, while for AMD China was the third largest market with about 15% of revenue. These revenue figures represent shipments to China for sale to customers in the country and assembly for computers sold elsewhere, meaning they may not fully represent Chinese consumption.

The critical question being asked is whether the government’s decisions will also extend to the private sector in China? Many companies in the Chinese market are owned or under government influence in one way or another, so such a scenario is not far-fetched, especially in light of what happened with Apple APPLE +0.45% Close: 0 Open: 174.25 High: 178.36 Low: 174.21 Cycle:– quote page News Graphs Company profile Recommendations Additional articles on the subject: For example – the Chinese government imposed a ban on the use of iPhones by government employees, a ban that also extended to employees of other companies in China that are under government ownership to one degree or another.

As a result of the American restrictions, for example, Chinese companies are enjoying a significant increase in demand – in 47.25% of all tenders for chip production equipment of Chinese manufacturers, local manufacturers won. Equipment revenue of China’s top 10 chipmakers grew 39% year-over-year in the first half of 2023, representing sales of $2.2 billion, according to a report by research firm CINNO. Chinese companies to date have accumulated equipment made in Japan and the Netherlands, but this is also going to change when these countries are expected to join the US in restrictions.

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