The new sanctions may provide a "negative growth" for China's server market, but there is hope that everything will be okay

The new sanctions may provide a "negative growth" for China's server market, but there is hope that

The US has increased sanctions against China's technology sector, particularly restrictions on the supply of servers, CPUs and GPUs, as well as the DRAM and NAND memory markets, reported by TrendForce analysts. Restrictions will not only affect companies in mainland China, but also US-based suppliers, from which server production-related businesses are most likely to suffer.

It is not yet clear how restrictions on the supply of server systems to cloud service providers in China will affect, since it is not clear whether Baydu, ByteDance, Alibaba and Tencent in the United States are equal to Baidu, ByteDance, Alibaba, and Tencent are used for military purposes. In any event, in the short term, suppliers will have enough stock of components, and in the long run much will depend on the willingness to sign commitments not to use purchased equipment for military purposes and the evolution of U.S. Department of Commerce regulations.

TrendForce does not rule out that many OEM producers like Inspur, H3C and Lenovo will fall under more stringent control and, if tensions between the US and China increase, the supply chain in mainland China may be seriously affected. Although a direct ban on the supply of commercial servers is not yet in question, companies that have not been approved by the United States may eventually enter the blacklist. At worst, a negative growth is expected in the Chinese server market.

Since the new sanctions are mainly related to the market for high-productivity computing and artificial intelligence, and thus to associated companies like Sugon, China's supercomputer technology could be severely damaged in the long run as sanctions are tightened.

Sanctions will be imposed on high-productivity GPUs, which are mainly applied in HPC calculations. Despite restrictions, large reserves of Chinese companies suggest that negative impacts on the Chinese industry can not be expected until 1 half of 2023, but in the long run the market may expect serious problems and a decline of tens of per cent, with high-product accelerators such as NVIDIA A100 and AMD MI250 previously being restricted.

However, the productivity of many CPU servers is generally below the limit set by the United States Department of Commerce, so only local Chinese designs such as Tianjin Haiguang, which can no longer be produced in Taiwan or Korea, are subject to sanctions. Intel and AMD will suffice to sign memorandums of understanding with customers, under which they will not use processors for military purposes or for supercomputers.

Samsung and SK hynix have already suspended the Chinese company's operational memory supplies and, if the latter promises not to use them in supercomputers and similar systems, it will be possible to return to cooperation. The same applies to other Chinese businesses potentially associated with high-performance computations, and the availability of stocks will not care for supplies in the short term.

With regard to the SSD required for ISI systems and in-depth training, restrictions in this area could have a severe impact on China's systems of appropriate use if there is a restriction on the supply to China of SSD at the corporate level.

Finally, little change is expected in the network equipment sector, as there are many suppliers of such iron in China, there is relatively little demand for key components and, in general, the process of producing such equipment is sufficiently mature and developed in the country itself, and it is difficult to trace whether such equipment is being used for military purposes. In the long run, it is likely that Chinese server manufacturers can switch to local suppliers.

New technical export restrictions have been imposed by the US on China very recently and it is not yet known how they will actually affect China's business, especially with regard to high-productivity computations. It is known that non-blacklisted companies can apply for supplies of the components they need when they are ready for verification by foreign supervisory authorities.