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szdaily -> Leisure -> 
Downgraded chips, eroded trust
    2024-01-15  08:53    Shenzhen Daily

THE reported plan by chipmaker Nvidia to begin mass production in the second quarter of 2024 of an artificial intelligence (AI) chip designed specifically for the Chinese market in compliance with the latest U.S. export regulations has sparked significant discussions across international media. Originally slated for launch in November, the plan was postponed due to integration issues faced by server manufacturers with the new chip. Concurrently, there have been rumors in foreign media about the reluctance of Chinese customers to procure the perceived “downgraded” chip versions.

Nvidia’s necessity to twice create and produce chips tailored for the Chinese market presents a peculiar tableau in the annals of international trade. The imposition of U.S. export control policies has trampled upon the principles of free trade, with Nvidia standing as just one example of its collateral damage.

In an ideal scenario of economic globalization and free trade, cooperation between Nvidia and the Chinese market would not only be reasonable and lawful but also mutually beneficial. China represents approximately 20% of Nvidia’s revenue, a segment that the company would find difficult to simply abandon. To circumvent U.S. export restrictions, Nvidia engaged in a strategic dance with Washington. While primarily an act of self-preservation, Nvidia’s persistence and adaptability hold positive implications, particularly amidst the current U.S. efforts towards a stringent “science and technology decoupling” with China.

However, maneuvering around U.S. export constraints by downgrading chip performance serves as a temporary stopgap amidst these exceptional circumstances, not a sustainable solution. Firstly, the “neutered version of the chip,” as dubbed by Chinese netizens, is inevitably poised to lose competitiveness within the Chinese market. Secondly, the pervasive uncertainty regarding potential U.S. government interventions remains a concern that Nvidia’s Chinese clientele cannot dismiss. The market Nvidia is coerced to relinquish undoubtedly provides impetus and opportunity for the accelerated development of China’s home-produced chips.

The U.S. export controls on China are ostensibly geared towards hindering the advancement of Chinese high technology. Nonetheless, the unintended consequence has been a catalyzation of technology progress within China.

Notably, the predicament faced by companies like Nvidia did not come unanticipated. Last year, U.S. semiconductor companies initiated an unusual “petition movement,” overtly expressing their dissent against the White House’s tightening of export controls on chips and semiconductor manufacturing equipment bound for China. The Semiconductor Industry Association (SIA) in the U.S. also issued a statement cautioning that restricting chip sales to China could rebound on the U.S. itself. Regrettably, the petition was overlooked by the U.S. government, and controls on U.S. chip export to China continued to intensify.

In a report published by The Wall Street Journal on Jan. 8, a House of Representatives panel voiced concerns regarding the perceived inadequacy of current U.S. export controls on chip sales to China. The panel has called upon the Biden administration to implement more stringent measures to counter China’s escalating dominance in the production of older-generation microchips. Interestingly, this proposal has sparked strong reactions from American citizens, with many expressing their apprehension. Some have suggested that the proponents of these measures are more concerned with erecting barriers against Chinese products in U.S. and Western markets rather than fostering competitiveness. Others have warned that such efforts may inadvertently lead to economic hardship for Americans, with comments such as “Unfortunately, these efforts will only lead Americans into poverty” and “Sounds very desperate.” It is evident that while apprehension is growing within the U.S. business sector and among the general populace, Washington politicians seem resolved to persist in their aggressive stance.

Ironically, what American chip companies dread most is not competition, but the capricious and unpredictable policy shifts from Washington, particularly concerning the tech industry’s relationship with China. This unpredictability poses the greatest challenge and engenders profound uncertainty within the industry. This uncertainty may erode international trust in the U.S. supply chain, which will not only affect Chinese companies but also prompt businesses from other nations to reconsider their reliance on the U.S., and seek out alternative, more stable supply markets.

(Global Times)

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