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New Controls on Chip Exports by the US Will Hinder China’s Development, Analysts Say

Summary

In a recent development, the expansion of US export controls on advanced chips, including those used for artificial intelligence, as well as chip manufacturing tools, will make it harder for China to develop in this sector, according to analysts. This […]

New Controls on Chip Exports by the US Will Hinder China’s Development, Analysts Say

In a recent development, the expansion of US export controls on advanced chips, including those used for artificial intelligence, as well as chip manufacturing tools, will make it harder for China to develop in this sector, according to analysts. This new set of rules, announced earlier this week, should not come as a surprise to China, as they do not deviate significantly from those proposed last October. The aim of these new regulations is to provide clarity regarding the original rules, and there has been a longstanding debate surrounding the ban on chips.

The executives of American chip manufacturers, including Intel, Qualcomm, and Nvidia, met with US Secretary of State Antony Blinken in July to request the cessation of additional export controls on chips to China. This meeting came after China announced restrictions on the export of materials used for chip manufacturing, in response to growing efforts by Washington to limit China’s technological advances.

The latest controls, enforced starting in 30 days from the announcement, expand export restrictions on advanced chips. They also limit the export of equipment and tools used in chip production to other countries, including Russia and Iran, to prevent the transportation of advanced chips to China. The US has also added Moore Thread and Biren Technology, two Chinese graphics processor manufacturers, to its Entity List. This move can prevent them and their 13 subsidiaries from accessing things like US chip design software.

The new list, published by the US Department of Commerce, already includes the Chinese telecommunications giant Huawei Technologies and the Chinese memory manufacturer Yangtze Technologies. These new measures address the gaps in the regulations published last October, and are likely to be updated at least annually, according to Secretary of Commerce Gina Raimondo. The Chinese embassy’s spokesperson in Washington strongly rejected these new restrictions, while Moore Thread and Biren Technology issued statements protesting against the new regulations.

Wang Shioven, a research fellow at the Institute for National Defense and Security Research in Taiwan, stated that a large amount of advanced AI chips are needed for training large-scale AI models, and Washington’s latest move demonstrates its determination to block China from acquiring the necessary chips through any means. “I think what the United States is doing is becoming a more precise military strike, meaning that they are now doing it more carefully,” he said.

Wang also mentioned that the unexpected release of Huawei’s new mobile phones, Mate 60 and Mate 60 Pro, in August, incorporating advanced 7-nanometer technology, likely triggered the new chip controls. Raimondo called Huawei’s development “extremely troubling.” During a hearing before the Senate Committee on Commerce on October 4th, she stated, “We need different tools…We need additional resources for enforcement.” “We don’t want to be more restrictive than necessary,” Raimondo said at a press conference on October 17th. “Export controls are not designed to impede China’s economic growth.” However, analysts argue that the US seems to be blocking China’s semiconductor industry because if Chinese technology continues to advance, they could innovate and overcome American restrictions to develop higher-class chips.

They point to two recent developments that favor China but work against the long-term development of semiconductors. On October 13th, the US announced that South Korean companies SK Hynix and Samsung would be allowed to continue using some valuable US chip production tools in their facilities in China. On the same day, TSMC, the Taiwanese company that is the world’s largest contract chipmaker, announced that it expects to receive a permanent license to continue operating its chip production factory in Nanjing. It had previously been granted an extended license to supply US chip production equipment to its factories in China, according to the Taipei Times. Chiu Chi-chang, an associate professor at Tamkang University’s School of Statistics in Taiwan, stated that South Korean semiconductor manufacturers expanded their chip production in China ten years ago, and their investments in this sector are among the largest in the world.

The slowdown of the Chinese economy after COVID-19 has reduced the demand for chips, and restrictions on importing semiconductors from the US limited the growth of South Korean manufacturers in the Chinese market, said Chiu. However, domestic Chinese chip manufacturers, such as Yangtze Memory Technologies Corp. and Changxin Memory Technologies, have increased their market share in China, which Chiu predicts will lead to intense price competition. Faced with reduced profits, the Chinese semiconductor industry will be limited in its ability to invest in the development of new chip technologies. Chiu referred to the allowance of US tools for foreign companies operating in China as a strategy favoring the US, not benefiting China. Chiu said that the US has adopted various strategies to prevent China from producing advanced AI technology, while also suppressing China’s growing influence in traditional semiconductor production and design, both of which will hinder China’s further semiconductor development.

FAQ

Q: What is the aim of the new US export controls on advanced chips?
A: The aim of the new regulations is to provide clarity regarding the original rules and to restrict the export of advanced chips and chip manufacturing tools to China.

Q: Which Chinese companies are already included in the US Department of Commerce’s list of restricted entities?
A: The list already includes Huawei Technologies, a Chinese telecommunications giant, and Yangtze Technologies, a Chinese memory manufacturer.

Q: Why do analysts believe that the US is blocking China’s semiconductor industry?
A: Analysts believe that the US is blocking China’s semiconductor industry to prevent China from advancing in technology and potentially surpassing American restrictions to develop higher-class chips.

Q: How have South Korean semiconductor manufacturers been affected by the slowdown of the Chinese economy and US restrictions?
A: The slowdown of the Chinese economy has reduced the demand for chips, and restrictions on importing semiconductors from the US have limited the growth of South Korean manufacturers in the Chinese market.

Q: How will the new US controls on chip exports impact the Chinese semiconductor industry?
A: The new controls will limit China’s access to advanced chips and chip manufacturing tools, restricting the development of the Chinese semiconductor industry.