South Korean media: US bans export of Nvidia H20 chip to China... Will South Korean chips be impacted? Spillover effects of the US-China tariff war On the 15th, the Donald Trump administration decided to indefinitely restrict the export of Nvidia's low-end AI accelerator "H20" to China. Amidst China's strong resistance to the US tariff offensive, the Trump administration intensified pressure on China by imposing export controls on core AI chips. An AI accelerator is a chip that enhances the speed of AI computations, assembled from components like graphics processing units (GPUs) and high bandwidth memory (HBM). It is a core AI chip required for data centers, with Nvidia currently dominating this market. The "H20", which has been listed as an export control target, is specially customized by Nvidia for the Chinese market after the comprehensive ban on the export of the most advanced AI accelerators to China. However, the confrontation between the US and China over AI chips is now impacting South Korea's chip industry. The H20 uses SK Hynix and Samsung Electronics' HBM. If the export of H20 to China is halted, South Korean companies will also face repercussions. The South Korean chip industry expressed concerns, stating: "There are predictions that President Trump's tariff war will lead to a reduction in global data center investments. If the actual export of H20 is interrupted, South Korean memory chips will also be affected." US-China tariff war affects South Korean chips On the 15th, Nvidia announced: "We have received notice from the US government that exporting H20 to China requires permission." Previously, the US government had indicated that it would allow the export of H20 to China, but ultimately decided to include it in the list of controlled items. If exports of H20 are obstructed, Nvidia's first quarter (accounting period February-April) results will have to account for a loss of $5.5 billion (approximately 7.6 trillion won). This is because products produced in advance for export will accumulate as inventory. The inventory of H20 poses a significant burden for South Korean chips. In 2024, Nvidia exported approximately 1 million H20 chips to China, with an estimated value of $12-15 billion (approximately 17-21 trillion won). For this year alone, it is expected to export 1.3 million in just the first quarter. Early this year, when it was revealed that China's low-cost high-performance AI "DeepSeek" used H20 to train AI, orders surged due to expectations of impending US chip control measures. Each H20 chip carries 6 HBM modules, almost all supplied by SK Hynix and Samsung Electronics. If exports of H20 are restricted, approximately 8 million HBM sales will be affected in just the first quarter, involving an amount of $1.6 billion (approximately 220 trillion won). Although Samsung Electronics does not supply HBM memory for Nvidia's cutting-edge AI accelerators such as "H100" and "Blackwell", H20 uses Samsung memory. Industry insiders stated: "If the US-China tariff war continues to hinder Nvidia's product exports to China, high-value-added products like South Korean HBM will inevitably be affected." In the global HBM market of 2024, South Korean companies hold a dominant share of 94.9%. China's rare earth export control also brings negative impacts Additionally, as a retaliatory measure against the US, China decided to impose export controls on 7 types of medium-to-heavy rare earths. This move could also negatively impact South Korean companies. Medium-to-heavy rare earths are key materials for manufacturing AI servers and smartphone power supplies, with China's supply chain accounting for 99% of the global market. China's control measures target the US, seemingly having no immediate impact on South Korea. However, if global AI chip supply chains encounter difficulties in component procurement due to rare earths, South Korean companies will also be hard-pressed to avoid consequences. Therefore, South Korean companies are closely monitoring developments. Moreover, the tariff rate previewed by Trump is also a focus of attention. If the rate is too high, the price increase of AI server products equipped with chips will inevitably lead to a contraction in corporate investment scale. Furthermore, the "AI chip production infrastructure" that Nvidia decided to build in the US to avoid the tariff war is also a heavy burden for South Korean companies. Nvidia's chosen partners are mostly Taiwan-based companies like TSMC and Foxconn. With Nvidia and TSMC at the center, the American AI chip ecosystem will reduce South Korean companies' participation space. Source: Chosun Ilbo Original article: https://www.toutiao.com/article/1829616935359498/ Disclaimer: The article solely represents the author's personal views.