The ongoing US-China trade war is posing significant challenges to big tech companies, particularly those based in the United States. This economic confrontation between the two superpowers is impacting various sectors and industries, hindering business operations and growth prospects.
Apple, the world’s most valuable company with a market cap of around $2.7 trillion, has recently felt the impact of the trade war in China. As a US company, Apple has become a target due to the escalating trade rivalry between the US and China.
Over the past three years, China and the US have been engaging in an economic battle, imposing trade restrictions and sanctions on each other. As a result, businesses in both countries are experiencing the direct consequences of these actions.
When the Biden administration imposed restrictions on the export of semiconductor technology to China, China retaliated by sanctioning the exports of germanium and gallium to the US. These materials are crucial for the manufacturing of advanced semiconductor technology.
Leading US chipmaker Nvidia, valued at $1 trillion, witnessed a decline in revenue due to the ban on exports to China. The US is also considering banning the export of data center AI chips, which directly affects Nvidia as 20%-25% of their chips are exported to China.
Furthermore, China recently banned the use of Apple products by its government employees, causing a 6% decline in Apple’s valuation, amounting to around $200 billion.
However, it is important to note that the banning strategy has primarily affected US firms’ sales figures rather than causing significant harm to the Chinese market.
For instance, in recent months, Chinese tech giant Huawei successfully launched the Mate 60 Pro smartphone, equipped with cutting-edge capabilities for accessing 5G networks. This smartphone’s chips were supplied by SMIC, China’s government-owned chipmaker. Despite the US’s efforts to prevent such technology from reaching China, the smartphone sold out within two days, and Huawei’s domestic market share grew from 7% to 13%.
In response, the US is considering banning Chinese firms from accessing US cloud computing technology. However, experts believe that China will find alternatives domestically, minimizing the impact of such a ban and potentially causing it to backfire.
Another consequence of the trade war was observed when a US chipmaker, Intel, failed to acquire Israeli firm Tower Semiconductors for $5.4 billion. The deal was hindered by delays and denials of approval from Chinese authorities. As a result, the US is becoming more cautious about its semiconductor and chip exports to the Middle East, fearing that these technologies may ultimately end up in Chinese hands.
While China continues its rapid technological development, it is equally responsive to any banning or restrictive measures imposed by the US.
Overall, the US-China trade war presents significant challenges for big tech companies, disrupting supply chains, limiting market access, and impacting revenue and valuations. As this economic battle continues, businesses must navigate these complexities to ensure their long-term success.