[why&next] Stop the Rise of AI in China, US Export Controls... Why Nvidia and AMD?

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The United States, which has been taking gradual steps to fundamentally block China's technological rise, has now targeted the artificial intelligence (AI) sector by putting its domestic companies Nvidia and AMD at the forefront. These companies have been notified to halt exports of cutting-edge AI semiconductors to China. With export routes immediately blocked, the damage to Nvidia and AMD is inevitable. However, the greater harm is expected to be borne by China. This is because the advanced AI semiconductors from these two companies are used not only by major Chinese private tech firms such as Alibaba, Tencent, and Baidu, but also in military projects by intelligence agencies.

◇What are the semiconductors whose export routes have been blocked?

According to local media and industry sources on the 1st (local time), Nvidia and AMD share the commonality of leading the global market in graphics processing unit (GPU) semiconductors, which determine competitiveness in AI technology. Experts evaluate that without these companies' cutting-edge AI semiconductors, it is difficult to effectively perform tasks central to AI technology such as image and voice recognition and natural language processing. These are all considered core areas of AI technology.

Nvidia, founded by Taiwanese-American second-generation immigrant Jensen Huang, confirmed that AI GPUs such as the A100 (code-named Ampere) and H100 (code-named Hopper) are subject to the new regulations. The older model A100, released in 2020, was developed for large-scale AI training and inference. The next-generation model H100, soon to be released, is regarded as essential for training ultra-large AI models.

For AMD, the data center GPU Instinct MI250 is included in the sanctions. Both products are used in data centers for machine learning computations and share the feature of supporting FP64 (Floating Point 64) operations. Furthermore, all future semiconductors from Nvidia and AMD with performance similar to or exceeding that of the A100 will also be classified as export-prohibited items. Essentially, the U.S. government has set a kind of 'performance ceiling' by leveraging its domestic companies.

Following this news, Nvidia and AMD stocks closed down 7.67% and 2.99%, respectively, on the New York Stock Exchange that day. For Nvidia, which derives about 26% of its revenue from China this year, the rapidly growing data center industry is inevitably impacted. When Nvidia's stock price plunged 10% intraday, the company clarified that "the U.S. government will allow continued development of the H100 AI chip in China."

◇Stop the semiconductor rise, what are the repercussions for China?

In China, giant advanced technology companies such as Alibaba, Tencent, Baidu, and Huawei are expected to be directly hit. Jefferies predicted, "Chinese companies may have to develop AI software using Google, Amazon Web Services, or use low-performance Chinese-made semiconductors." Ultimately, Chinese companies' AI capabilities are bound to fall significantly behind for years.

This measure also targets the Chinese military. The cutting-edge semiconductors from these two companies are used in military advanced computing technologies that process satellite imagery and filter vast amounts of data such as intercepted chats and emails by intelligence agencies. U.S. authorities explained that the related regulations aim to rectify the risk of AI cutting-edge semiconductors developed by U.S. companies being used by the Chinese military.

Notably, this export regulation comes amid escalating U.S.-China tensions surrounding Taiwan, a major semiconductor production hub, drawing even more attention. Analysts assess that the 'semiconductor war' between the two countries over technological supremacy could intensify further.

The U.S. has already been comprehensively countering China's technological rise based on semiconductors in areas such as 5G, aerospace, and quantum computing. Following the recent Chip4 initiative (South Korea, U.S., Japan, Taiwan) aimed at excluding China from supply chains, this measure reaffirms the U.S. intention to block China's technological rise by mobilizing export routes of its domestic companies.

Some voices express concern that this could escalate into the worst-case scenario, demanding Samsung Electronics and Taiwan's TSMC to halt semiconductor supplies to China. Jefferies commented, "It is not at that stage yet," but added, "The U.S. will evaluate the effects step-by-step before taking extreme measures." Experts conclude that China will ultimately have to focus on developing its own semiconductors.

◇China condemns the U.S. for 'technological hegemony'

China criticized this measure as U.S. technological hegemony. Wang Wenbin, spokesperson for the Chinese Ministry of Foreign Affairs, stated, "The U.S. is trying to suppress and oppress the development of emerging markets and developing countries by leveraging its scientific and technological superiority," calling it "typical technological hegemony." Xu Jiuyeting, spokesperson for the Chinese Ministry of Commerce, said, "This measure will undermine the legitimate rights and interests of Chinese companies and the stability of global industries and supply chains."

This content was produced with the assistance of AI translation services.