US Government restricts Chip sales to China; Is it an opportunity for ASX-listed players?

Key Takeaways:

1. The US has taken an initiative to control the export of US Chip to China by introducing a new license for exporting chips to China.

2. The US aims to reduce the risk that the products may be used by the Chinese military.

3. Amid this restriction, many small players in this industry are getting market attention.

NVIDIA and Advanced Micro Devices, Inc shares have dropped ~22% and ~14.5% in the last five trading sessions following the new license introduced by the US to export chips in China and Russia.

NVIDIA said that the Company was applying for a licence to continue some Chinese exports. However, they feel that there could be uncertainty about whether the US government would grant an exemption or not.

As per the US Government, introducing the new license for exporting chips to China, including Hong Kong, will reduce the risk that the products may be used by the Chinese military.

With this decision, NVIDIA’s products A100 and H100 products might get impacted. These are two graphics processing units sold to businesses. The license includes any future NVIDIA integrated circuit achieving both peak performance and chip-to-chip I/O performance equal to or greater than the threshold that A100 and any system that includes those circuits.

Besides, on 10 August 2022, US President Joe Biden signed a US$280 billion CHIPS act to boost domestic high-tech manufacturing, which is a part of his administration’s push to boost US competitiveness over China.

Further, the US has set aside US$52 billion to boost the US computer chip sector.

About A100 and H100:

A100:

NVIDIA A100 Tensor Core GPU provides unprecedented acceleration at every scale to power the world’s highest-performing elastic data centers for Artificial Intelligence, data analytics, and High-performance computing (HPC). A100 offers up to 20 times more performance over the prior generation and can be partitioned into seven GPU instances to dynamically adjust to everchanging demands.

H100:

NVIDIA H100 GPUs feature 4th generation Tensor Cores and the Transformer Engine with FP8 precision that provides up to 9 times faster training over the previous generation for mixture-of-experts (MoE) models. Deploying H100 GPUs at the data center scale provides excellent performance and brings the next generation of exascale HPC and trillion-parameter AI within the scope of all researchers.

Recent development of NVIDIA:

On 09 August 2022, NVIDIA announced important updates for creators and developers using NVIDIA Omniverse, a real-time 3D design collaboration, and world simulation platform. In the next phase, NVIDIA plans Omniverse to move to the Cloud. The Company highlighted that new features for Omniverse Kit, Nucleus, and the Audio2Face and Machinima apps will help users to better build physically precise digital twins and realistic avatars. It will also redefine how virtual worlds are created and experienced.             

NVIDIA and its competitors:

NVIDIA is a popular company known for its gaming, Artificial Intelligence, and mobile computing. In the fields of Graphics processing units, personal computers, and semiconductors, NVIDIA is the top stock. However, there are still two companies that are considered the leading competitors. These include Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC).

However, these companies are also US-based companies. Hence, we may expect a similar restriction from the government to export chips to China.   

Can we consider this restriction an opportunity for small players?

It is true that China imports chips from NVIDIA; however, China relies heavily on South Korea for its semiconductor supply.

The restriction on NVIDIA’s chip supply can be considered an opportunity for gaming, Artificial Intelligence, and mobile computing companies.        

While the US has started taking measures to control chip supply to China, many players have started gaining market attention. The restrictions could be an opportunity for companies new in this field and looking for an opportunity to expand in the coming days. Keeping this in mind, let’s see a few companies from this space listed on ASX.

Silex Systems Limited (ASX: SLX)

Silex Systems Limited is an Australian technology company focused on commercialising its innovative SILEX laser enrichment technology. This technology is used for Uranium production and enrichment (nuclear power), Silicon enrichment (silicon quantum computing), and Other probable markets (eg, medical radioisotopes).

Archer Materials Limited (ASX:AXE)

Archer Materials develop innovative deep tech for commercialisation in quantum technology and human health.

4DS Memory Limited (ASX: 4DS)

4DS Memory Limited is engaged in the creation of electronic memory storage. The Company was established in 2007, and it owns 32 US-granted patents and added 1 patent application pending for its in-house developed intellectual property.

Altium Limited (ASX: ALU)

Altium Limited is amongst the first PCB design tool providers in the world. The Company has grown into a global market leader with a leading PCB software tool in use today.

Bluglass Limited (ASX: BLG)

Bluglass Limited is a global provider of the GaN photonics industries. It offers cutting-edge, custom laser and LED development across the industrial, defense, display, and scientific markets. Backed by a wide network of supply-chain partners, the Company provides laser diode products, from small batch custom lasers to high-volume and off-the-shelf products.

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