//php echo do_shortcode(‘[responsivevoice_button voice=”US English Male” buttontext=”Listen to Post”]’) ?>
—Part of an ongoing EE Times series: A Vulnerable U.S. Electronics Supply Chain. Previous parts can be found here.
The latest round of export controls announced by the U.S. government on semiconductors and chipmaking tools are “not welcome,” according to an analyst commenting to EE Times. Another said the U.S. may use the sanctions to win improved market access and IP protection in a top-level meeting with China next month.
The new rules reinforce the Oct. 7, 2022, restrictions on China’s ability to both purchase and manufacture high-end chips critical for military advantage, the Department of Commerce (DoC) said yesterday in prepared remarks. The updates, which take effect next month, are necessary to maintain the effectiveness of the Oct. 7 controls, close loopholes and ensure they remain durable, the DoC said.
The chips affected by the new controls include Nvidia’s A800 and H800 GPUs that the company designed for the Chinese market in response to last year’s export controls, Albright Stonebridge Group associate partner Paul Triolo told EE Times. Intel’s Gaudi2 GPU is also affected, he said.
“The AI semiconductor-related rule is not sitting well with U.S. industry and technology leaders, such as Nvidia,” Triolo added. “The Biden administration has basically ignored concerns expressed by Nvidia CEO Jensen Huang about the impact of tightening controls and moving the goalposts. The new ‘performance density’ metric in the new rule will capture the modified A800 and H800 GPUs that Nvidia has been able to ship to Chinese end users, and also the Intel Gaudi2 GPU that Intel intended for the China market.”
The short-term impact will not be significant, according to Nvidia.
“We comply with all applicable regulations while working to provide products that support thousands of applications across many different industries,” Nvidia said in remarks it prepared for EE Times. “Given the demand worldwide for our products, we don’t expect a near-term meaningful impact on our financial results.”
Intel told EE Times that the company is reviewing the regulations and assessing the potential impact. Earlier this year, Intel CEO Pat Gelsinger voiced reservations about the expected round of new controls, saying they could impact the chipmaker’s investment plans. Intel counts on China for more than a quarter of its annual revenue.
“For U.S. leaders in the GPU space, further controls on advanced GPUs are not welcome, and they believe that the controls only incentivize Chinese firms to double down on finding domestic alternatives free of U.S. technology,” Triolo said.
Another rule, placing domestic Chinese GPU leaders Biren Technology and Moore Threads on the U.S. Entity List, has drawn a strong response from Beijing and the firms involved that’s likely to draw a strong retaliation from Beijing, Triolo added.
He said Beijing is likely to delay its pushback until a mid-November Asia-Pacific Economic Cooperation meeting between U.S. President Joe Biden and Chinese leader Xi Jinping that both sides are preparing for.
The U.S. will aim to win concessions on market access and IP protection from China during the upcoming talks, Mehdi Hosseini, Susquehanna senior equity research analyst, told EE Times. He expressed doubt about the outcome.
“I don’t think even the policy experts have any clue how this is going to play out,” he said.
The U.S. is also likely to seek a separation of military from commercial tech enterprises in China, Hosseini said.
“If I were the U.S. government, I would want to know where all the Chinese fabs are located and know what equipment goes to what fab,” he said.
Following the October 2022 U.S. actions, China responded with a cybersecurity review against U.S. memory giant Micron that resulted in a partial ban on the firm’s products in China. Just months ago, Beijing implemented export controls on gallium and germanium, critical minerals important for semiconductor production, as a warning to the U.S. on expected export controls, Triolo said, adding that he expects further sanctions.
“Beijing will respond in a number of ways, including potentially more controls on critical minerals, new cybersecurity reviews against U.S. companies and other measures,” he said.
In the meantime, the Chinese government will be searching for ways to make its domestic industry less reliant on U.S. technology, Triolo said: “The new rules only further incentivize Chinese firms to find workarounds, develop alternative supply chains and design out U.S. technology. There are already some less capable domestic alternatives for GPUs, for example, and the tightened rules will accelerate efforts to develop advanced semiconductor manufacturing capabilities, as exemplified by the Huawei Mate 60. The form and level of Chinese retaliation could also send U.S.–China relations into another downward spiral.”
Huawei has re-emerged as China’s largest smartphone brand, displacing Apple, according to a CNBC report.