The White House is currently considering a new wave of sanctions aimed at limiting China’s access to the chips needed to train generative artificial intelligence models.
Joe Biden keeps signing. The American president is currently studying the implementation of new restrictions on the export of semiconductors to China, according to the American media Bloomberg. These would particularly concern two new types of chips.
On the one hand, Gate-all-around (GAA) chips, a critical technology to produce the thinnest chips (three nanometer engraving) with reasonable precision and energy costs. Intel, AMD and Nvidia plan to mass produce chips using this architecture from next year. High bandwidth memory chips (HBM) on the other hand, which are particularly useful when it comes to performing complex computations involving fast processing of a large amount of data, therefore for training and functioning of larger language models.
These two new restrictions would therefore further limit the ability of Chinese companies to use the chips necessary for the use of generative artificial intelligence models, a technology that is currently booming towards which a large number of companies are rushing towards.
Semiconductors, essential components of the global economy
Computer chips are everywhere today: in smartphones and computers, but also connected objects, cars, household appliances, space, weapons, industry… During the pandemic, the lack of chips has thus created bottlenecks in several key sectors of the economy.
The most advanced and complex chips to design are those used in cloud giants’ data centers to train and run cutting-edge artificial intelligence models, which require enormous computing power. To train ChatGPT, OpenAI’s chatbot, no fewer than 10,000 graphics cards from Nvidia, the leader in AI chips, were needed. Given the transformative potential of generative AI, these chips today take on an extremely strategic aspect.
However, if they are mainly manufactured in Southeast Asia, and in particular by the Taiwanese giant TSMC, on the other hand, the United States dominates the design part of the chips, thanks to companies such as Nvidia, but also Intel, AMD and Qualcomm.
US efforts to block China’s advance
Engaged in both fierce economic competition with China and a process of decoupling with the latter, the United States has for several years endeavored to prevent the progress of its rival in cutting-edge semiconductors. It all started during the Trump administration. In 2019, the US Department of Commerce banned Huawei from buying components from US companies without government permission. In May 2020, these restrictions were tightened: since then, foreign manufacturers using American components or software must obtain special authorization to design or produce semiconductors for Huawei. SMIC, the largest Chinese semiconductor manufacturer, was then added to the blacklist.
Since entering the White House, Joe Biden has continued and even emphasized the strategy started by his predecessor. He began by adding several Chinese IT companies to the blacklist, on the grounds that they would serve the military advancement of the Middle Kingdom. Then, in October 2022, there was a thunderclap: the US president banned exports to China of the most advanced semiconductors incorporating US technology, regardless of where they were produced. A restriction that effectively prevents China from getting its hands on cutting-edge AI chips, all of which are based on American technology.
A year later, Washington is strengthening sanctions to respond to the avoidance strategies implemented by China… and by American companies, for whom the Middle Kingdom represents a large market. Less advanced chips from Nvidia, designed specifically for export to China despite sanctions, are now also affected. The foreign subsidiaries of Chinese companies are also targeted, which China used to buy advanced semiconductors and repatriate them.
The global semiconductor war
At the same time, the US is putting more pressure on the allied countries to join the sanctions against China. Thus, the Biden administration managed to get Japan and the Netherlands to comply with US sanctions that banned the export to the Chinese market of equipment necessary for the production of the most advanced chips. The Netherlands is a particularly strategic player as it is home to ASML, the only company in the world that produces the machinery needed to manufacture the most advanced chips.
The recruitment of the Netherlands is therefore a severe blow to China, which, faced with US sanctions, is striving to develop its own design and production capabilities at home, not without some success. In August 2023, China caused a surprise when Chinese smartphone giant Huawei released a 5G processor manufactured by its compatriot SMIC and equipped with an engraving fineness of seven nanometers, a performance that China was previously unable to achieve.
The US, for its part, is now seeking to develop manufacturing capacity on its own soil to reduce its dependence on Taiwan, at a time when tensions between the island and the Middle Kingdom are rising. According to a recent report by the Semiconductor Industry Association (SIA), the US chip lobby, and the Boston Consulting Group (BCG), the US is expected to triple its domestic semiconductor manufacturing capacity by 2032 compared to ten years earlier. The U.S. share of global chip manufacturing capacity would rise from 10% in 2022 to 14% in 2032, marking an unprecedented increase in the U.S. national footprint in this market, according to the report.
