Intel shares fall on report China will limit US-made semiconductors
China Government Sales The Chips Could And Limits Of In Dollars Of If Their Use Lose Intel Puters Servers Billions In
Shares in Intel fell after a report that China has adopted new guidance to limit the use of US-made microprocessors and servers in government computers.
The new rules mean that chips made by the companies will be gradually replaced with local alternatives, the reported, citing guidelines unveiled by the finance ministry and the Ministry of Industry and Information Technology in late December.
Software provided by US companies including Microsoft are also set to be replaced, the FT said. Still, for now there remains some flexibility for government agencies and state-owned enterprises to buy computers powered by foreign processor servers, the newspaper reported citing two unnamed procurement officials. Microsoft and Intel declined to comment.
The US chipmaker employs almost 5,000 people in Ireland. China has been pushing to eradicate key overseas technology from within its most sensitive organs over the past years. In 2022, it ordered central government agencies and state-backed corporations to replace foreign-branded personal computers with domestic alternatives within two years.
Last week, reported that the US is considering blacklisting a number of Chinese semiconductor firms linked to Huawei Technologies, marking another escalation in a campaign to ringfence and curtail Beijing’s artificial intelligence and semiconductor ambitions.
Intel and Advanced Micro Devices could lose billions of dollars in sales if China limits the use of their chips and servers in government computers, several Wall Street analysts have said. Beijing has been trying to reduce its reliance on foreign firms by building out its local semiconductor industry as it grapples with US export curbs on technology including cutting-edge chips.
The latest move could make a big dent on the chip firms' earnings as China was Intel's largest market in 2023 with 27% of revenue, while AMD drew about 15% of its sales from the country. Microsoft does not break out its revenue from China.
"A total cessation of China governmental purchases of Intel and AMD CPUs might impact revenue by low-single digits," said Bernstein analyst Stacy Rasgon, predicting a hit of up to $1.5bn (€1.4bn) for Intel and a few hundred million dollars for AMD. But he said Intel could face a higher hit to its profit - of mid-single digits to low-double digits, "given higher exposure and the vagaries of a worse cost structure".
