By Nitya Chakraborty
The resignation of Nvidia CEO Jensen Huang on Thursday over his multiple extra-marital affairs including one with an alleged spy of China and the possibility of investigations into the allegations by the new Democratic Party dominated Congress, have sent shockwaves to the Chinese political leadership, especially to the President Xi Jinping.
The latest developments have serious consequences for the improving relationship between China and USA, especially the common programme for AI development through collaboration and cooperation as decided at the last May summit between Trump and Xi Jinping in Beijing. China has now much to fear as the Congressional investigations will cover wider areas and there is possibility of more scandals coming out. Huang is a Chinese-American. His involvement with a woman with the Chinese origin, has already damaged the image of the Chinese-Americans who have been in the key positions in the US high tech sector.
The timing has also ominous consequences for China. China’s AI sector is rapidly closing the gap with the U.S. and the Chinese experts were looking for just another three years for touching the U.S. tech level in AI. They were highly looking for the renewal of the chips exports by the U.S. in early 2027. But this sudden development has given a big jolt to the Chinese hopes. Apart, as a result of the midterm elections, the Democrats who do not favour Trump’s China policy, will be in charge of the house committees in the Congress. Even if Trump wants to continue the chips exports through renewal early next year, it may not be possible due to the Congress opposition.
President Xi is meeting President Trump at the APEC summit in Shenzhen in China next week. He will be taking up the issue with Trump, but taking into account the political mood among his countrymen, Trump may not be able to do much to satisfy Xi Jinping because the controversy has now gone far beyond Nvidia CEO’s wrongdoing, it has get involved in deeper national security issues. U.S. law makers are trying to make use of the Huang episode to target the Chinese semiconductor industry by imposing a series of restrictions.
What has alarmed China are the reports from Capitol Hill that three measures were being considered for inclusion in the fiscal 2027 National Defense Authorization Act (NDAA): the AI Overwatch Act, which would give Congress greater authority over advanced-chip exports; the Chip Security Act, which would require companies to track chips to deter smuggling; and the Multilateral Alignment of Technology Controls on Hardware (MATCH) Act, which seeks to push US allies to impose tighter restrictions on semiconductor manufacturing equipment exports to China.
Previously, US restrictions on semiconductor exports to China were largely implemented by the Commerce Department through its administrative authority, including revisions to the Export Administration Regulations (EAR) and related control lists. Embedding additional restrictions in legislation, however, could make them more difficult to reverse.
According to AI experts, if chips tracking, coordinated controls with allies and congressional oversight of licensing are written into law, the authority and discretion over these restrictions will shift more toward Congress.. This would make future adjustments or relaxation considerably more difficult, potentially creating lasting obstacles to easing China-US tensions over technology. China can’t take now the advantage of dealing with deal maker Trump. The Congress committees questionings will make it difficult for the Trump administration to have any lenient view on high tech collaboration with China.
That China is now reconciled to the coming imposition of U.S. curbs on chips is evident from the manner Beijing has rushed to woo the South Korean chips manufacturers and urged them to come to the vast Chinese market. South Korea’s semiconductor exports are booming, but a new cloud is gathering over the industry – and it comes from the US. Chinese government has told South Korea that the U.S. market of AI is in turmoil and Seoul should better look to the Chinese market as a temporary alternative.
The US is an important market for South Korean semiconductors, even if it is not the largest. In July, Chosun Biz cited data from the Bank of Korea showing that the US ranked fourth among destinations for South Korean semiconductor exports in 2025, with shipments worth $19.02 billion, up from $13.626 billion three years earlier. Its share of South Korea’s total semiconductor exports also edged up, from 9.6 percent to 10.3 percent.
Chinese experts have posed the question now whether political resistance to data center construction in the US could put the brakes on the growth of its semiconductor demand – or even cause it to stall or decline. For South Korean chipmakers, this is a development that warrants close attention because of the impact on South Korean exports. China imported US$ 74.46 billion of chips from South Korea in 2025, now in view of apprehensions about US decision, China wants to import from South Korea in 2027.
Whatever the eventual impact on US semiconductor demand, the AI jitters unleashed by the midterm elections may be enough to prompt South Korean chipmakers to think ahead. If they seek to diversify their markets against the risk of slower growth in US demand, China is likely to be high on their lists. The Chinese mainland remained the largest destination for South Korean semiconductor exports in 2025, taking shipments worth $74.46 billion, or 40.3 percent of the total.
This comes as South Korea presses ahead with plans to expand its semiconductor capacity. The Yonhap News Agency reported in September that the country plans to double its semiconductor production capacity within five years. Yet with the outlook for US AI investment becoming less certain, South Korean chipmakers may have to look increasingly to non-US markets to sustain their export growth, further increasing the importance of the Chinese market.
Experts point out in the present political situation, even the Republicans will associate with Democrats in supporting the strong curbs on high tech exports to China. Trump, despite his willingness to come to a deal with Xi Jinping, will be not in a position to help Xi Jinping at the moment. Still in the next five weeks, President Xi, through bilateral talks in both Shenzhen next week and at Florida G20 meeting in the middle of December, will make every effort to ensure continuation of present collaboration norms with U.S. in high tech. (IPA Service)
