Tate Yoko Research Institute – TRI

Original Title: US-China tech war heats up
03 September, 2022

Inside China Tech!
I’m Bien Perez, senior production editor with the SCMP’s technology desk.

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More US semiconductor restrictions loom for China
 
The United States government is expected to impose more  semiconductor restrictions on China, after banning Nvidia and Advanced Micro Devices (AMD) from selling advanced chips used for artificial intelligence and high-performance computing work to the world’s second-largest economy.

“We believe the next risky areas are autonomous driving chips from Nvidia, Intel-owned Mobileye and Qualcomm,” the Jefferies report said. It indicated that chips used for self-driving vehicles could arguably be used for military applications.

“Worst of all, high-end CPUs from Intel and AMD [could follow],” the report said. It pointed out that high-end central processing units based on 7-nanometre or 5-nm semiconductor manufacturing processes “are key to a wide range of applications”, including cloud computing servers, 5G base stations, personal computers and high-end military equipment.

“The worst-case scenario is for the US to subject all Chinese companies to the Direct Product Rule, which means no [semiconductor] foundries would be allowed to supply Chinese integrated circuit design firms, including Chinese foundries,” the report said.

“We are not there yet, and the US will likely evaluate the effectiveness of each incremental step before more drastic action is considered.”

The potential actions that the US could initiate reflect the urgency faced by China in safeguarding its hi-tech industries, especially its semiconductor sector. 

The latest chip restrictions follow US export controls on technologies for the production of advanced semiconductors and gas turbine engines announced last month by the Bureau of Industry and Security, an agency under the US Department of Commerce.

The US tech export controls escalated Washington’s efforts to boost America’s hi-tech advantage over China, after US President Joe Biden signed into law the Chips and Science Act that earmarks nearly US$53 billion in incentives for semiconductor manufacturing on US soil.

In July, Washington intensified its push to form the so-called Chip 4 Alliance – a partnership that includes South Korea, Taiwan and Japan. 

Beijing considers that alliance as a plot by the US government to exclude China from global semiconductor supply chains.

Meanwhile, the Chinese government’s likely response to the Nvidia and AMD bans is to accelerate the adoption of local products as substitutes, according to Jefferies analysts. They also expected the affected companies, which include internet firms and communications service providers, to use multiple lower-end Nvidia graphics processing units, which are not banned, to somehow replicate the processing power of the now-restricted chips.

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