US bans export of advanced chips to China

What has happened?

• Chip designer Nvidia Corp. Said that U.S. officials told it to stop exporting two top computing chips for artificial intelligence work to China . It’s a move that could affect Chinese firms’ ability to carry out advanced work like image recognition and hamper Nvidia’s business in the country.
• The announcements signals a major escalation of the US crackdown on China’s technological capabilities as tensions bubble over the fate of Taiwan , where chips for Nvidia and almost every other major chip firm are manufactured. You can check https://thegenuinenest.com/us-arms-deal-and-germany-sends-warships-to-taiwan-china-warns/.to know more about Taiwan issue.
• Nvidia said that US officials instructed it to stop it’s powerful A100 and H100 graphics processing units (GPU) to customers in China.
• AMD said it has received new license requirements that will prevent its MI250 artificial intelligence chips from being exported to China.
• The US department of Commerce has not officially announced the new restrictions.

Significance

• The Bank on selected chips, which China is still unable to make itself, marked an escalation from current trade sanctions targeted at specific companies and sales restrictions on advanced chipmaking equipment.
• The Bank is set to crimp the ability of Chinese tech companies in areas such as metaverse, artificial intelligence, cloud computing and even facial recognition, data centres.

China’ response to the US chip ban –

• Chinese foreign ministry spokesperson Wang Wenbin said on Thursday that the US ban was typically technological hegemonism and an abuse of the national security concept.
• “The US is attempting to take advantage of its own technology edge to depress development of emerging markets and developing countries.. .China firmly opposes it” he said.
• China firmly opposed such restrictions as they would hurt not only legitimate rights of Chinese companies but also interests of American businesses.
• Industry expert said the new US export controls were a worrying sign for China as it must rely on US firms for many necessary products and components. In the long term, China’s development in technology will be affected if export controls further escalate to more semiconductors such as CPU and FPGA chips.

Why US is doing this?

• The ban is part of Washington’s efforts to deny China access to advanced US chip technologies over fears that they could be used by the Chinese military.
• Nvidia said US officials told it the new rule will address the risk that products may be used in, diverted to, a ‘ military end use’ or ‘ military end user’ in China.
• US lawmakers passed the Chips and Science Act, which restricts American chip manufacturers from investing in advanced manufacturing facilities in China for a decade if they accept federal subsidies.
• Chip4 Alliance : Separately, Washington is backing up a Choir Alliance with Japan, South Korea and Taiwan. It’s a move that Beijing sees as an attempt to marginalise China’s role in global supply chains.
• The US is also pressing Dutch firm ASML to restrict Chinese sales of its high end EUV lithography systems, which are used for the most advanced types of chips.
• China has been making significant progress in GPU research and development, but the country is still years behind AMD and Nvidia in advanced versions.

Loss to the US Companies –

• Nvidia said it had booked $400 million in sales of the affected chips this quarter to China that could be lost if firms decide not to buy alternative Nvidia products.
• It is not clear how many Chinese end users of the Nvidia and AMD GPU chips would be affected but Wang pointed out that China’s large data centres require powerful GPUs as they’ve an edge in handling large troves of data in real time

China is home to a number of start-ups aspiring to make chips that can compete with Nvidia and AMD. Although many were founded by former staffers of those companies, though few have attained meaningful scale.