China has emerged as the world's leading chip consumer, contributing significantly to the revenues of major chip manufacturers. For instance, Qualcomm derives 63.6% of its earnings from China, while Texas Instruments and Broadcom get 49.1% and 35% of their revenues from the country, respectively. Other prominent American firms, such as Intel, Nvidia, and AMD, also depend heavily on the Chinese market.
Over the past few decades, the Chinese market's openness has been a boon for American chip companies, allowing them to reap enormous profits. China has also gained access to a wealth of technology and established a solid foundation in the high-tech sector. The country's chip production is set to reach a staggering 324.19 billion units by 2022.
Although China's domestic chips might not yet be on par with high-end counterparts, they have successfully penetrated low-end markets. This rapid growth has not gone unnoticed, as the United States, along with Japan and the Netherlands, initiated a trilateral chip agreement to mitigate China's potential dominance.
Under the agreement, Japan blocks 23 critical semiconductor categories, the Netherlands restricts access to mid-to-high-end lithography machines, and the US limits the availability of high-performance chips, including GPUs. This agreement aims to encircle China's chip industry and curb its progress across the semiconductor supply chain.