China’s Chip Restrictions Rattle Intel, AMD, and Microsoft

Reports of China’s plan to limit the use of Intel and AMD chips and Microsoft’s software in government computers have sent shockwaves through the tech industry. 

The move aims to reduce reliance on foreign technology and promote domestic alternatives, potentially impacting U.S. companies’ billions of dollars in sales.

Implications for Tech Giants:

In response to the news, Intel and AMD shares fell over 2%, signaling investor concerns about the potential revenue impact. China accounted for a significant portion of Intel’s revenue (27%) and AMD’s sales (15%) in 2023. 

While Microsoft’s revenue breakdown for China has not been disclosed, its shares dipped slightly in premarket trading.

Analysts predict a significant revenue hit for Intel and AMD, with estimates ranging from a few hundred million dollars to $1.5 billion. The cessation of China’s governmental purchases could dent both companies’ earnings, particularly affecting Intel due to its higher exposure to the Chinese market.

Profit Margin Concerns:

Given its larger market presence and cost structure, Intel may face a more substantial impact on its profit margin than AMD. 

The shift away from U.S. chips could lead to mid-single to low-double-digit profit declines for Intel, raising concerns about its bottom line.

Response and Market Reaction:

Intel, AMD, and Microsoft have not yet responded to requests for comment on the reported policy changes. However, the tech firms collectively shed billions in market value based on premarket movements, highlighting investor apprehension over the potential ramifications of China’s restrictions.

The move reflects broader tensions between the U.S. and China, with both countries vying for technological dominance. 

Beyond chips, Apple has also faced scrutiny, with reports of Chinese agencies and state-backed firms discouraging the use of iPhones among employees, further exacerbating geopolitical tensions.