China cut off from high-tech chips

The US is blocking chipmaker Nvidia from selling some of its advanced products to China, according to the company’s latest filing with the Securities and Exchange Commission.

Why it matters: The new restrictions are an escalation of US efforts to maintain its edge over China in access to high-end semiconductors, an essential part of modern military equipment.

  • The newly restricted chips are typically used for artificial intelligence work, like image and speech recognition.
  • They can also be used for a range of military applications, like analyzing satellite images for weapons or gleaning intelligence from digital communications, Reuters notes.

US officials argued the new policy would prevent “China's acquisition and use of U.S. technology in the context of its military-civil fusion program to fuel its military modernization efforts,” per the BBC.

  • Chinese officials called the restrictions part of a “technological blockade” being imposed by the US and its allies.

Zoom out: Control over the supply of advanced chips is quickly turning into a major source of conflict between the US and China. 

  • The US and its allies have already cut China off from the tools needed to make high-end chips, including one machine made exclusively in the Netherlands that’s needed for the most advanced chips.
  • Faced with these import restrictions, China has spent tens of billions of dollars to develop its own semiconductor industry, but still can’t manufacture the most advanced chips domestically.

Bottom line: Chips are now like a high-tech version of oil—a strategic resource needed for advanced military and economic applications that the world’s major powers are fighting to control.