Chipmakers Squeezed as Trump Ratchets Up China Trade Pressure
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Welcome to Tech News Briefing. It's Thursday, April 17th. I'm Victoria Craig for The Wall Street Journal. From controls on imports to limits on exports, the Trump administration is cracking down on American chip makers who want to send their U.S.-made tech to China. Then

Then Facebook parent company Meta is on trial, with regulators saying it's got a monopoly over social media. We have the inside scoop about the conversations CEO Mark Zuckerberg has had to try to stave off the public fight. But first, the U.S. government is making it even harder for American chipmakers to do business with China. The administration has already opened an investigation into semiconductors, which it says will likely result in new tariffs on chip imports.

This week, it also confirmed that export licenses are now required for sending specialty-made U.S. chips to China. The new rule covers NVIDIA's H20 chips and similar ones made by advanced micro-devices that the companies export to China and other nations. The Trump administration said it's imposing the restrictions on national security grounds.

But the move has sent chills through the industry, like we told you in last night's TNB Tech Minute. Shares of NVIDIA and AMD both dropped around 7% yesterday, bringing their market value losses so far this year to around 25%. Asa Fitch covers semiconductor companies for The Wall Street Journal. So Asa, these export licenses are now required for certain kinds of chips made...

both by Nvidia and AMD. Tell us why and what kind of activity this is really designed to restrict. These chips that are being restricted are chips that those companies developed for the Chinese market specifically to fall under performance thresholds that had earlier been put in place by the U.S. government. The aim with all these restrictions is to limit China's ability to develop its military capabilities

Things like cyber espionage and a lot of other things using AI. The idea is that if you don't let them have the chips, they have a harder time or it slows down the Chinese in developing these things and that in the U.S.'s view is good for the U.S. And the problem for NVIDIA is that, like you said, it designed these bottom shelf chips to comply with export restrictions from the U.S. to China. And those were still seeing a lot of demand. So what happens to its earnings now? It

NVIDIA designed these chips basically to allow it to continue to participate in the Chinese market. Despite the U.S. export restrictions, this predates the tariffs. But it certainly is going to have a major effect as the Trump administration clamps down on these kinds of chips in the Chinese market. NVIDIA is taking a large $5.5 billion charge related to inventory and other things that it had built up in preparation for making these chips and selling them in China.

that's going to mean less revenue for NVIDIA, a lot bigger of a revenue impact than the charge they're taking. Some analysts estimate it might be $13 billion in the coming quarter. It could be more than that in the quarters ahead as the residual effect of that kind of continues. China is not its biggest market and market by far, but it is a big market. And it's one where NVIDIA has long sought to participate, even as the U.S. ratcheted up its export controls.

What will NVIDIA do with these chips that were designed for the Chinese market? And would it want to or could it just pivot that part of the supply chain just to manufacture and sell them in China instead of America? It's unclear what they're going to do with the inventory that they have. There's very, very high demand for NVIDIA's chips. It's unclear exactly what manufacturing stage these chips are at, this inventory is at, and whether it can be moved around and repurposed for other things.

that's going to be a good question for NVIDIA. Clearly, though, in taking a charge, they see a major impact from this move. They may have to just abandon that inventory at some stage, or parts of it at least, but that remains to be seen.

What kind of impact is all of this having on the broader semiconductor industry globally? Because we already know that the announced tariffs are causing a wave of uncertainty. Dutch equipment maker ASML yesterday said it saw fewer orders than expected for machines that produce these chips. So what's sort of the longer term impact of all this on the broader industry?

It's complicated because you have tariffs in play, you have the possibility of a global recession in play, you have the normal dynamics of a semiconductor market that's very cyclical, even in better times. So all of those things are operating all at once. For ASML, for example, their business supplying equipment to make chips that go into AI training and inference is doing very well. It's other parts of the industry that are not doing so well. People aren't

buying smartphones and computers and electric vehicles and other things like that at the same pace as they had been in the past. And so those areas where there are a lot of chips have seen some weakness. That weakness trickles through, hits ASML sales.

There's also some struggles technologically among some of those customers, namely Intel and Samsung have taken longer to ramp up production of advanced chips. That means they need fewer ASML machines, or at least they don't need them right now. So that affects orders.

The bottom line is that these tariffs and the threat of them have a major impact on the chip industry. And it remains to be seen what the full impact is, partly because the Trump administration has suggested there are more tariffs on the way specifically targeting semiconductors. That was WSJ reporter Asa Fitch. Coming up, an exclusive look at how Mark Zuckerberg personally lobbied to prevent an antitrust case from going to trial. That story after the break.

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This week, Mark Zuckerberg took the witness stand in a fair competition trial in Washington. The Federal Trade Commission is arguing that his company, Meta, has an unfair monopoly in social media thanks to its long-ago acquisitions of Instagram and WhatsApp. For its part, Meta says it faces plenty of challenges from other giants in the space like YouTube and X. It also points to clearances from the FTC itself, which originally gave the deals the green light.

Wall Street Journal reporter Rebecca Ballhaus writes that Zuckerberg worked behind the scenes to prevent this case from going to court, and she's got some exclusive details. Rebecca, you and your colleagues spoke to people familiar with the matter, and your reporting shows that Zuckerberg seemed fairly confident that President Trump and his administration was actually going to back him in getting the FTC lawsuit resolved.

That's right. You know, you really can't overstate how much time and money Mark Zuckerberg has put into trying to build a pretty strong relationship with Trump and the incoming administration. He hired a Republican consultant way back in 2021 to start making inroads there. He donated to the inauguration. He attended the inauguration. He settled this lawsuit that Trump had brought against Facebook for $25 million.

And so going into this, it seemed the MEDA team did think that they were going to be able to avoid a trial here and reach a settlement. And that hasn't proved to be the case.

And this case actually originated during President Trump's first term in 2020. It was then dropped and then bolstered and brought again during President Biden's time in office. With Trump back at the White House, there have really been a flurry of meetings, both with Zuckerberg and his team and people from the other side. And there's even been attempts by Zuckerberg to strike a deal.

That's right. So we reported in this story on a phone call that happened in late March between Zuckerberg and the head of the Federal Trade Commission, where Zuckerberg said that the company would pay $450 million to settle the antitrust case. And this really fell short, certainly of the $30 billion that the FTC had initially demanded, but also of the $18 billion that the FTC indicated that they would settle for.

On the call, we understand that Zuckerberg sounded somewhat confident that Trump might back him up with the FTC. And to be clear, we do understand that Trump considered settling this case and that he asked questions about what that might look like and asked staff to work out a deal at one point. But in the end, it does seem like other elements

elements of the Republican Party got to Trump and persuaded him not to settle. In the end, Meta upped their offer to under $1 billion, but it still wasn't enough. And have we had any comments from Meta? Yeah, Meta gave us a comment saying that the company was prepared to win at trial and that they feel that that doesn't make sense for the FTC to bring this case to trial when it's obvious that Instagram competes with TikTok and other platforms. And

And just walk us through that, because I think the cost for Zuckerberg to try to get President Trump on side was fairly steep. You mentioned he attended the inauguration, but just walk us through some of the other sort of attempts that he's made to try to get this dismissed or settled before it actually went to trial.

So it's all part of this larger effort that he's made to build up this relationship. He went to Mar-a-Lago several times during the transition. He's been at the White House at least three times since the inauguration. He's donated to these various Trump funds.

And then he's also made changes to his own company that conservatives have long wanted, including dialing back Meta's content moderation policies. And so it's just kind of amazing to see how much work he's put into this and that it doesn't seem to have panned out. That was WSJ reporter Rebecca Ballhaus. You can read even more details about the behind-the-scenes conversations over the Meta antitrust case in her story. We've got a link in the show notes.

And that's it for Tech News Briefing. Today's show was produced by Julie Chang with Deputy Editor Chris Inslee. I'm Victoria Craig for The Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.