Chips: In the USA, export control has setbacks – 12/10/2023 – Market

Although it is taking over the iPhone market in China, Huawei’s new smartphone, Mate 60 Pro, remains behind in design and quality. This is the opinion of a Chinese executive from Shanghai, who uses both, in part because he constantly travels abroad.

“In China, for work, Huawei is more convenient,” he says, citing the camera and signal strength as advantages. For the rest, “the iPhone stands out in every aspect.”

In other words, what surprises since its launch, more than the cell phone, is what it has built in: the 7nm chip manufactured by SMIC and designed by Huawei, which managed to return to the 5G market.

No one was more surprised than US Commerce Secretary Gina Raimondo, who was on a bullet train from Beijing to Shanghai when the device appeared online in late August.

She doesn’t hide her resentment. Last weekend, speaking at the Reagan Foundation in the US, when asked about the launch of the Mate 60 Pro, she was ironic: “I was there. Thank you very much.”

At the time, it became a meme on Chinese networks, with supposed advertising endorsement for cell phones. In the following months, no matter how much the department looked for ways to expand sanctions on the two companies, nothing happened.

Raimondo turned to another front against China, increasing the barrier to the sale of Nvidia’s artificial intelligence chips.

As it had done before, the company announced that it would produce a chip at the limit of the barrier, for the Chinese market. But last week, under pressure from Raimondo, it postponed — and Chinese big tech companies focused on AI, like Baidu, are now buying chips in the category, designed by Huawei.

Perhaps due to the sequence of setbacks, Raimondo’s outburst at the Reagan Foundation ended up targeting Nvidia itself, an American company that has jumped from fourth to first place among chip giants in the world, in revenue in the most recent quarter, leaving behind TSMC and Samsung.

“There are CEOs who got angry with me because they’re losing revenue,” she said, advising to stop complaining because “that’s life.” She took Nvidia to task for producing “all of its chips in Taiwan and not within our borders.” She described efforts to create chips on the edge of export controls as a game of “Whack-A-Mole” because “they’re in the business of making money, and every time I do something, I take revenue from them.”

To avoid this game, he says he is implementing a new way of “dialogue with the industry, in which our engineers can be step by step with their engineers”.

In short, “we tell them, ‘Our intention is to deny China technology that does X, Y, or Z,’ almost like the commander’s objective” in war strategy, “and they have to comply.”

Speaking later to CNBC, Raimondo expanded on the confusion, saying Nvidia and others must follow the “spirit” of the law.

“It is not clear what the legal path is to prevent new Nvidia sales, as they are in compliance with the rules”, comments Paul Triolo, from consultancy ASG. “Companies respect the letter of the law and not some ‘spirit’, especially something as broad as ‘slowing down China’s technological development’.”

While passing through Singapore, Nvidia’s CEO, Jensen Huang, said that China accounts for 20% of the company’s revenue and that he intends to continue developing chips for the country, avoiding mentioning Raimondo.

“The American government knows what we are doing, and when we create products that achieve the vision [do governo], we will be able to take them to the Chinese market. We hope, as always, that this will be successful, but there is no guarantee.”

He added that Nvidia has several large Chinese customers for AI (artificial intelligence) chips in Singapore, listing ByteDance (TikTok), Tencent and Alibaba, and acknowledged that Huawei, like other companies producing this range of chips, is a competitor “very formidable”.

Raimondo’s harsh words, at the founding of former President Ronald Reagan, also went to allies, such as Japan, who are being monitored not to export to China.

“We have a similar approach to the Cold War CoCom to counter the threat that China poses,” he said, referring to the US-led post-war committee for the technology embargo of Eastern Europe and the Soviet Union.

The secretary was also attentive to Congress. She said that she was being approached by parliamentarians, demanding results against Beijing, and stressed that her budget is limited — and that they, congressmen, could increase it. Soon after, an expected Chamber report came out, pointing out Raimondo’s failure to contain the “technology hemorrhage” into China.

For Triolo, all the comments made by the secretary over the last week “seem designed to fend off criticism of the application of export controls”, which would be presented by the Chamber. With serial setbacks, she is cornered in Washington and Silicon Valley.

For analyst Kevin Xu, a former member of the Department of Commerce during the Barack Obama administration, “the beneficiary of all this, of course, is Huawei.” Not that its AI chips “are anywhere near where Nvidia’s are now, but simply because it became the only one available.”