The US “blockade” will accelerate the development of Chinese chips
New restrictions this week on U.S. chip tech exports to Chinese firms prompted an angry reaction from Beijing, but beyond the rhetoric, China is expected to unleash a new round of funding to boost domestic production of semis. -drivers.
Washington has steadily tightened its grip on China’s tech sector, limiting access to chip components and cutting-edge machinery. Its latest move is to introduce tough licensing requirements that could block sales of high-end processors from US chipmakers Nvidia and AMD, which are used in artificial intelligence systems.
China’s Foreign Ministry on Thursday accused the United States of trying to impose a “technology blockade” on China to maintain its technological “hegemony” and said it was extending the concept of national security. The United States has said it is concerned that its technology may be suitable for military purposes.
Unable to break such a “blockade”, “the restrictions will energize China to find local replacements”, said a senior executive at a Chinese chipmaker.
The government has already poured huge sums of money into the chip sector, with state investment funds targeting chip start-ups that promise to replace foreign rivals. The largesse has prompted accusations of waste, corruption and mismanagement. Chipmaker Tsinghua Unigroup defaulted on its bonds in 2020 despite securing tens of billions of dollars in government aid.
Analysts say a string of high-profile failures won’t deter Beijing in its quest for chip self-sufficiency as Washington steps up to encircle China’s tech sector with ever-tighter controls.
The setting up of blocks for the supply of cutting-edge chips from Nvidia and AMD comes weeks after the United States banned the sale to China of electronic design automation (EDA) software, necessary for the design high-end chips. The measures will speed up the switch of Chinese companies to domestic chipmakers to avoid being cut off from foreign suppliers, Shanghai-based wealth management firm HWAS Assets wrote in a note.
In July, the US Congress approved $52.7 billion in grants to build chip facilities in the US for companies agreeing not to fund high-end semi-production in China, under US law. about fleas and science.
Randy Abrams, head of Asia Semiconductors research at Credit Suisse, wrote in a note that banning investment in advanced production in China “would further limit access to foreign talent and investment to develop Chinese industry. semiconductors”.
In the past, chip factories or “fabs” in China led by Korea’s Samsung, Intel of the United States and UMC of Taiwan “have been a good source for China to help develop intellectual property, talent and skills. resources to develop its national semiconductor industry”. he said.
Analysts at investment bank Jefferies said the biggest customers of Nvidia products that were effectively banned this week are cloud service providers, internet and artificial intelligence companies. They predicted there would be an attempt to move to local graphics processing unit (GPU) replacements, but the widespread use of Nvidia’s Cuda “operating system for AI” software would create incompatibility issues. .
The senior executive said it was only a matter of time before China developed its own working EDA software. American tools “are incredibly complex and sophisticated, so you can’t replicate them overnight, but with enough money and ingenuity you can come close,” he said.
Others disagree that China can strike alone. Stephen Ezell, director of the Information Technology and Innovation Foundation in Washington, said China’s efforts to develop a “closed-loop semiconductor ecosystem” had failed.
“It’s counterproductive for a country in a high-tech industry to try to do everything on its own,” he said.
The devastating impact of Washington’s sanctions on Huawei, which banned the Chinese telecommunications giant from all chips using American technology in 2020, underscores the interconnected nature of the global chip supply chain. The move crippled the company’s smartphone business.
The Netherlands has also bowed to pressure from Washington and banned exports of extreme lithography (EUV) equipment to China, needed to manufacture chips that power AI and blockchain technology. “China was not going to be a player once the United States got Dutch acquiescence,” said Douglas Fuller, an expert on China’s semiconductor industry.
Even if the United States succeeds in limiting China’s access to foreign chip technology, industry insiders are skeptical of Washington’s ability to completely exclude it from the global supply chain.
An industry veteran in Japan said Washington’s latest attempt to compete with an adversary ended in failure after political appetite waned and funds dried up. In the late 1980s, the United States created a consortium of semiconductor companies motivated by fears that Japan had usurped its dominant position.
“It’s been reasonably successful for a while, mostly because big companies like Intel have strongly supported it. But government funding is unstable and drying up with the change of administration in Washington,” he said. .
“The semiconductor industry is global and it is difficult to put effort into helping a country to be competitive against its global allies and competitors.”
Additional reporting by Nian Liu in Beijing