Samsung Electronics announced securing an order from Japanese AI company Preferred Networks to manufacture chips using its advanced 2-nanometre foundry process and advanced chip packaging service. The trade exchange between the two countries marks Samsung’s first disclosed order for its cutting-edge 2-nanometre chip manufacturing process, although the order size remains undisclosed.
The chips will employ high-tech gate-all-around (GAA) architecture and integrate multiple chips into a single package to enhance connection speed and reduce size. According to Preferred Networks ‘ VP Junichiro Makino, designed by South Korea‘s Gaonchips, these chips will support high-performance computing hardware for generative AI technologies, including large language models.
The development highlights Samsung’s advancements in semiconductor technology and its role in supporting innovative AI applications.
The former CEO of ASML, the known semiconductor equipment maker, criticised the US-China chip disputes as ideological rather than fact-based. Peter Wennink, who retired in April after a decade at ASML, stated that the US imposed ongoing restrictions on exporting tools to China since 2018, driven by ideology rather than practical considerations. These restrictions have affected ASML’s ability to serve its Chinese market, which is second only to Taiwan.
During his tenure, Wennink sought to balance stakeholders’ interests by lobbying against overly strict export controls and addressing intellectual property concerns with Chinese officials. He emphasised that ASML has long served in China, creating obligations towards its customers and staff. Despite perceptions that he might favour China, Wennink clarified that his loyalty lies with his company’s customers, suppliers, employees, and shareholders.
Predicting the future of the chip war, Wennink suggested that the geopolitical conflict could continue for decades, given the complex and deeply entrenched interests involved. He expressed concerns that ideological battles could undermine the balanced management of business interests.
The European Commission has initiated a consultation with the semiconductor industry to gather views on China’s expanded production of older-generation computer chips, known as legacy chips. The effort precedes two voluntary surveys targeting the chip industry and major chip-using firms, which are due in September. The Commission aims to assess the role of legacy chips in supply chains and explore potential joint measures with the US to address dependency and market distortion.
That move comes amid rising tensions between the EU and China as the European Union seeks to shield its industries from Chinese competition. Recently, the Commission imposed provisional tariffs of up to 37.6% on Chinese electric vehicles, signalling a potentially tougher stance towards Beijing. Chinese investment in legacy chip production, driven by state subsidies and US restrictions on advanced chips, has raised concerns in the West about long-term market implications and potential oversupply.
The Commission’s antitrust chief, Margrethe Vestager, hinted in April at a possible investigation into legacy chips after discussions with US officials. A detailed report released by the European Commission earlier this year highlighted the extensive support provided by the Chinese government to domestic firms across various sectors, including semiconductors. The new chip-focused surveys are broader in scope than previous US security-focused surveys, aiming to gather comprehensive data on chip sourcing, products, pricing, and competitive estimates.
Chinese tech companies, from industry giants to ambitious startups, converged at the World AI Conference in Shanghai to showcase their latest innovations and express strong support for the country’s AI sector despite US sanctions. Over 150 AI-related products and solutions are being exhibited, with notable foreign firms like Tesla and Qualcomm also participating. SenseTime, previously known for facial recognition, unveiled its most advanced large language model, SenseNova 5.5, positioning it as a rival to OpenAI’s GPT-4.
Despite challenges posed by US sanctions limiting access to advanced chips, executives at the conference expressed confidence in China’s AI sector’s resilience. Zhang Ping’an, head of Huawei’s cloud computing unit, emphasised the need to innovate in cloud computing to overcome chip shortages. Similarly, Liu Qingfeng, chairman of Iflytek, highlighted that Chinese-developed large language models could rival global standards, stressing the importance of having independently developed and controlled AI technologies.
Robin Li, CEO of Baidu, urged the AI industry to focus on practical applications rather than just developing large language models, which require significant computing power and AI chips. Li stressed that foundational models, whether open-source or closed-source, only hold value with applications. Such a sentiment was echoed by other industry leaders, emphasising the need for innovation and practical use cases in AI development.
A recent report indicates that China’s major venture capital investments increasingly focus on technology sectors that are aligned with government policies, such as AI and semiconductors. Despite an overall decline in funding, China accounted for 90% of global venture capital (VC) in the chip sector last year, investing $22.2 billion, more than double the $9.5 billion from 2022.
According to Preqin, a private investment data company, three significant deals, primarily involving partnerships between municipal authorities and Sino IC Capital, accounted for half of the semiconductor venture investments. Sino IC Capital manages the state-backed China Integrated Circuit Industry Investment Fund, also known as the Big Fund.
Overall, the report highlights three key takeaways. Firstly, China’s clean technology VC deals have surpassed those in the US in both value and volume for 2022 and 2023, especially in electric vehicles. Secondly, overall venture capital in Greater China has dropped sharply, a 42% decrease from the previous quarter, due to geopolitical tensions and fewer exit opportunities. Thirdly, foreign VC investments in Chinese firms have plummeted from $67 billion in 2021 to $19 billion in 2023, while domestic investments have remained stable.
Why does it matter?
The trend is clear evidence of the ongoing US-China tech supremacy war and the effect of US sanctions. With the US trade tariffs and restrictions on American venture capital firms prompting foreign investors to withdraw from the region, this report reveals how the Chinese government, in response, has stepped up and is backing state-funded entities to fill the void, with significant investments also coming from domestic tech companies.
A senior executive at Chinese tech giant Huawei dismissed concerns that a shortage of advanced AI chips would hinder China’s leadership in AI. Zhang Ping’an, CEO of Huawei Cloud, acknowledged China’s computing power limitations but emphasised the need for innovation over-reliance on the most advanced AI chips. His comments come amid tighter US restrictions on AI chip shipments to China, including bans on sales from companies like Nvidia.
Speaking at the World AI Conference in Shanghai, Zhang urged a shift in perspective, stating that the absence of cutting-edge AI chips shouldn’t be seen as a barrier to leading in AI. He highlighted Huawei’s development of its AI chip, Ascend, which is widely used in China for training AI models despite being less powerful than Nvidia’s offerings.
Zhang advocated for innovative approaches leveraging the cloud to overcome the lack of advanced chips, suggesting that combining cloud, edge, and network technologies can enhance efficiency and reduce energy consumption. He also positioned Huawei Cloud as a leader in providing these innovative solutions.
The US has revoked eight licenses this year, which previously allowed certain companies to export goods to Huawei in an attempt to exert pressure on the Chinese telecom giant. Earlier in May, the Commerce Department announced that it had revoked some licenses but did not specify the details.
The development occurred as Republican hardliners in Congress pushed to intensify measures against Huawei, which surprised the industry last August with a new phone featuring an advanced chip from Chinese manufacturer SMIC despite US export restrictions. The phone boosted Huawei’s smartphone sales by 64% in the first six weeks of 2024. Additionally, Huawei’s smart car components business has driven its fastest revenue growth in four years during 2023.
These details highlight the Biden administration’s efforts to hinder Huawei’s recovery despite previous measures aimed at weakening the company on national security grounds. Meanwhile, Huawei continues to deny being a security threat.
Why does this matter?
Such license revoking measures can be located as a part of the larger tech war intensification between the US and China, especially concerning chip market dominance. With the race between the two superpowers set to continue, it’ll cost the global economy enormously with a loss of trade revenue.
By 2030, the US is expected to face a shortage of 90,000 semiconductor technicians, jeopardising its goal to produce a significant share of the world’s advanced chips. The Biden administration has launched a new programme to develop the domestic chip workforce to address this looming crisis. The initiative, known as the workforce partner alliance, will allocate part of the $5 billion from the National Semiconductor Technology Centre (NSTC) to fund up to ten projects focusing on workforce development.
The NSTC, established under the 2022 Chips and Science Act, will provide grants between $500,000 and $2 million to support these projects. The effort is part of a broader $39 billion investment to boost domestic chipmaking capabilities, with additional funds earmarked for research and development. The new programme marks the first workforce-specific funding opportunity under this landmark legislation.
As the US seeks to expand its semiconductor production, the NSTC aims to build a robust workforce capable of supporting this growth. The administration has already committed substantial funding to major semiconductor manufacturers, and more grants are expected in the coming months. The most recent grant of $6.7 million will support the establishment of a new Florida factory by Rogue Valley Microdevices, focusing on defence and biomedical chip applications.
Nvidia is facing potential charges from the French antitrust regulator over allegations of anti-competitive behaviour, marking an enforcement agency’s first action against the chip giant. The scrutiny follows raids conducted last September in the graphics cards sector, explicitly targeting Nvidia as part of a broader inquiry into cloud computing. The company’s prominence in AI and graphics chips, boosted by the popularity of applications like ChatGPT, has drawn regulatory attention in Europe and beyond.
While Nvidia and the French authority declined to comment, the European Commission is unlikely to expand its current review, focusing instead on the French investigation. Concerns highlighted by the French watchdog include Nvidia’s CUDA chip programming software, essential for accelerated computing using GPUs, and its investments in AI-centric cloud providers like CoreWeave. These legal developments represent provident measures for potential risks associated with market dependence and competition in the rapidly evolving AI sector.
Why does it matter?
Under French antitrust rules, companies in violation could face fines of up to 10% of their global annual turnover, though concessions can mitigate penalties. Simultaneously, the US Department of Justice is leading an investigation into Nvidia, which is part of the broader scrutiny of Big Tech alongside the Federal Trade Commission. Nvidia’s regulatory challenges reflect worldwide scrutiny over its market dominance and strategic expansions in critical technology sectors.
Micron Technology surpassed revenue expectations in the third quarter due to robust demand for its memory chips, particularly in AI applications. However, its fourth-quarter revenue forecast, while meeting expectations, disappointed investors, leading to a 7.2% drop in after-hours trading.
The forecast failed to meet recent optimistic projections fuelled by the AI boom, which tempered market enthusiasm following a significant rise in Micron’s stock price earlier in the month. Micron’s Chief Business Officer emphasised their strategic advantage in AI chip supply, highlighting robust ongoing demand for their products in the years ahead.
Why does it matter?
Micron remains a prominent player in high-bandwidth memory chips essential for advanced AI systems, positioning it strongly in the semiconductor market. The company’s performance typically establishes benchmarks for the broader chip sector, influencing market sentiment toward competitors like Nvidia, whose stock declined following Micron’s earnings report.
