US-China Tech War Intensifies: Intel Faces Sales Drop Due to Semiconductor Sanctions

The U.S. government is increasingly imposing sanctions on China’s semiconductor and artificial intelligence (AI) industries. The ban on the sale of central processing units (CPUs) for PCs, which had previously been allowed for export, has led to inevitable revenue losses for leading U.S. semiconductor company, Intel. Additionally, there are reports that measures to block the export of large language model AIs, such as ChatGPT, to China are being considered, further intensifying the U.S.-China conflict over technological dominance.

On the 8th (local time), Intel announced through a registration statement that its second-quarter sales could be lower than initially projected due to U.S. government restrictions on semiconductor exports to China. Initially, Intel projected second-quarter sales between $12.5 billion and $13.5 billion, but it has now revised this to between $12.5 billion and $13 billion. As a result of this news, Intel’s stock fell 2.2% in the New York stock market. Intel explained that it had received a notification from the U.S. Department of Commerce the day before that it would cancel its permission to sell to Chinese companies.

Previously, the U.S. Department of Commerce had announced that it would revoke the semiconductor export licenses of U.S. companies to Huawei. Intel and Qualcomm were mentioned as representative examples. Huawei announced in April that it would equip its new laptop, the MateBook X Pro, with the latest Intel CPU, the Core Ultra. The Core Ultra has a neural processing unit (NPU) and is considered a CPU that opens the AI PC era. Republican congressmen criticized the U.S. Department of Commerce for allowing AI semiconductor exports.

On the same day, Qualcomm also announced that one of its export permits to Huawei was canceled. However, Qualcomm’s stock price did not change significantly. Qualcomm is currently exporting 4G mobile modems to Huawei. The impact of 4G modem sales is not significant due to the transition to 5G.

The U.S. government is also considering restrictions on the export of AI models along with semiconductor export regulations. Reuters reported that day that “the U.S. Department of Commerce is considering regulations to limit the export of advanced non-open source AI models like ChatGPT to China.”

Recently, AI development has been divided into large language model AI using a large number of parameters and small language model (SLM) AI that aims for lightweight but less performance. The latter is made as open source with its design open to the public, allowing for free modification and use outside of the developer. As a result, Chinese companies tend to modify and use the open-source Meta Llama series.

On the other hand, the most powerful large language model AI does not have its design open to the public. ChatGPT of OpenAI, Gemini of Google, and Claude of Anthropic are representative examples. The export regulations under review by the U.S. Department of Commerce appear to be a measure to prevent China from using such a large language model AI. It is likely to block enterprise contracts that allow each company or institution to optimize and use large language model AI, even if individual subscriptions are possible.