Huawei Technologies is on the brink of releasing a new AI chip, Ascend 910C, to challenge Nvidia’s dominance in the Chinese market. The company has made significant strides despite US sanctions, with Chinese internet firms and telecom operators recently testing the processor.
Huawei claims that the Ascend 910C rivals Nvidia’s H100, a powerful AI chip that has been unavailable in China.
Why does this matter?
The development signals Huawei’s ongoing efforts to circumvent restrictions and bolster its position in the AI sector.
Mainland China has seen a significant surge in AI company registrations, with over 237,000 new firms added in the first half of this year, according to Qichacha, a corporate database platform. The increase in AI companies brings the total number of AI-related companies to 1.67 million due to Beijing’s dedicated efforts to promote AI development.
Notably, almost 90% of these companies, amounting to over 1.48 million, were established after 2017. This surge followed the State Council’s publication of the Next Generation Artificial Intelligence Development Plan, aiming to position China as a global leader in AI technology.
The boom in AI firms highlights China’s burgeoning unicorn landscape, producing four prominent ‘AI tigers’ – Baichuan, Zhipu AI, Moonshot AI, and MiniMax – each securing billions in investments. However, the fierce competition in the sector has also led to a decline in operational AI companies, with only about 419,000 of the new enterprises from last year still active.
Despite the competitive pressures, Beijing continues to bolster the AI industry through supportive policies. Premier Li Qiang introduced the AI Plus initiative at the Two Sessions earlier this year, aiming to integrate AI technology across traditional industries to enhance efficiency and drive economic growth.
China has approved 487 new AI algorithms for use in deepfake technologies. These include products from major domestic tech companies such as Baidu, Alibaba, and Tencent and foreign firms like Hewlett-Packard. The approval is part of the country’s regulatory efforts under the Cyberspace Administration of China (CAC), which mandates the registration of AI algorithms used in deepfakes. Notable approvals include Baidu’s image generator, Tencent’s search algorithm, and Alibaba’s document creation tool.
The green light for new algorithms is the second-largest since the regulations took effect in January 2023. The regulations aim to control technologies that create realistic virtual scenes using deep learning and augmented reality. Companies failing to comply face removal from domestic app stores. The CAC has released six allowlists, with the biggest batch of 492 algorithms approved in June.
Cai Peng, a partner at Beijing’s Zhong Lun Law Firm, notes that the increasing size of these lists indicates a more streamlined process between regulators and applicants. The roughly two-month application process involves detailed document submission and revisions as requested by the CAC.
The latest approvals include a healthcare knowledge algorithm for Douyin, a music generator from Microsoft’s Xiaoice, and a character dialogue generator for NetEase. Foreign brands like HP and Yum China also had their algorithms approved. China’s regulatory framework for AI, which includes mandatory registration of generative AI models before public use, reflects the country’s striving to leadership in AI regulation.
Hundreds of Chinese sellers on Temu have protested against what they describe as excessively high penalties imposed by the platform. Temu, an international online marketplace owned by PDD Holdings, has seen increased competition with rivals like Shein since its launch in September 2022. Merchants claim that new penalties introduced in April can reach up to five times the value of a sale when customers return products, causing significant financial strain.
A garment seller from Guangzhou reported that Temu has not adequately addressed their concerns despite urging vendors to register their fines. That led to a larger protest involving around 400 to 500 merchants from China on 29 July. Protesters shared videos online showing large crowds outside Temu’s headquarters, highlighting the widespread discontent among sellers.
Temu acknowledged the protest, noting that most participants were garment sellers who were also active on Shein. The company emphasised its efforts to resolve disputes and maintain quality standards, though some merchants argue that the penalties drive them out of business. Despite the challenges, Temu claims that most merchants on the platform are flourishing and benefit from increased sales and customer satisfaction.
Many sellers, however, remain in a difficult position. One vendor, facing fines nearly triple her initial estimate, expressed the struggle of balancing penalties with minimal profits. Another merchant, unable to quit due to financial commitments, described the situation as having ‘no way out.’ Temu maintains that while penalties are essential for quality control, they aim to enforce them fairly and resolve disputes effectively.
Shanghai has announced a massive $13.8 billion investment to bolster its integrated circuit, biomedicine, and AI industries. The biggest city in China is making a significant push to solidify its position as a global tech leader.
The AI sector will benefit significantly, with investments directed towards intelligent chips, software, autonomous driving, and intelligent robots. The following initiative is part of Shanghai’s broader strategy to foster innovation and build a competitive edge in the global market.
Funds will support original innovation, enhancing Shanghai’s technological capabilities. This move is expected to accelerate the development of globally competitive enterprises within the city, driving growth and attracting talent.
By focusing on these key sectors, Shanghai aims to solidify its reputation as a leading commercial hub. The strategic investment underscores the city’s commitment to advancing technological innovation and economic development.
The rise in digital assets is helping Russia and China overcome payment difficulties caused by sanctions. Qifa, a digital platform established in 2013, has shifted its focus from importing Chinese goods to facilitating bilateral trade. As sanctions complicate direct bank settlements, Qifa has turned to digital currencies and cryptocurrencies to speed up transactions.
Payments between the two countries face delays of one to three months due to increased compliance checks from Chinese banks. Many banks are cautious of secondary US sanctions, leading to bottlenecks and the need for alternative methods like small regional banks. Digital currencies like tether now play a crucial role in easing these issues, allowing for quicker settlements.
Russia’s legislation is adapting to the use of digital financial assets for cross-border payments. This includes considering a bill to legalise all cryptocurrencies for foreign trade. These changes aim to bypass traditional banking systems and avoid long payment delays, providing a more efficient solution for businesses.
Qifa is set to list on the Moscow Exchange and is expanding its operations to Kazakhstan and other former Soviet countries. Western sanctions continue to affect trade, especially concerning dual-use goods that could support Russia’s military. However, companies like Qifa are finding innovative ways to maintain and grow their business despite these challenges.
Apple’s market share in China declined by two percentage points in the second quarter of 2024, dropping from 16% to 14%, according to data from market research firm Canalys. The drop highlights the challenges Apple faces in its third-largest market as it battles intensifying competition from rivals like Huawei.
Huawei saw a 41% year-on-year increase in smartphone shipments during the quarter, driven by the launch of its Pura 70 series. This surge has propelled Huawei back into the high-end smartphone segment, despite facing US sanctions that have restricted its access to global chip supplies. Huawei’s market share in China is projected to reach 19% in 2024, making it the top vendor.
Overall, China’s smartphone shipments rose by 10% in the quarter, with Vivo leading at 19% market share, followed by Oppo, Honor, and Huawei. Apple’s market share drop resulted in its ranking falling from third to sixth place. To combat the decline, Apple has ramped up its discounting efforts, offering significant price cuts on select iPhone models.
Despite being deemed a national security threat by American officials, Huawei’s sales have rebounded, demonstrating resilience in the face of U.S. restrictions. Analysts predict Huawei’s strong performance will continue, challenging Apple’s position in the Chinese market.
The Cyberspace Administration of China (CAC), China’s internet regulator, has publicly identified and named agents facilitating local ChatGPT access. The latest crackdown comes in the backdrop of OpenAI’s decision to restrict access to its API in ‘unsupported countries and territories’ like mainland China, Hong Kong, and Macau.
Alongside CAC, other local authorities have penalised several website operators this year for providing unauthorised access to generative AI services like ChatGPT. These measures are indicative of the CAC’s commitment to enforcing China’s AI regulations, which mandate rigorous screening and registration of all AI services before they can be publicly made available. Even with these stringent rules, some developers and businesses have managed to sidestep the regulations by using virtual private networks.
Why does this matter?
Despite Beijing’s ambition of leading the world’s AI race, it is stringent about its requirement of GenAI providers upholding core socialist values and avoiding generating content that threatens national security or the socialist system. As of January, about 117 GenAI products have been registered with the CAC, and 14 large language models and enterprise applications have been given formal approval for commercial use.
A new AI video-generating model, Kling, developed by Beijing-based Kuaishou, is now widely available but with significant limitations. Initially launched in a waitlisted access for users with Chinese phone numbers, Kling can now be accessed by anyone providing their email. The model generates five-second videos based on user prompts, simulating physics like rustling leaves and flowing water with a resolution of 720p.
However, Kling censors politically sensitive topics. Prompts related to ‘Democracy in China,’ ‘Chinese President Xi Jinping,’ and ‘Tiananmen Square protests’ result in error messages. The censorship occurs at the prompt level, allowing for the generation of videos related to these topics as long as they are not explicitly mentioned.
That behaviour likely stems from intense political pressure from the Chinese government. The Cyberspace Administration of China (CAC) is actively testing AI models to ensure they align with core socialist values and has proposed a blacklist of sources for training AI models. Companies must prepare models that produce ‘safe’ answers to thousands of questions, which may slow China’s AI development and create two classes of models: those heavily filtered and those less so.
The dichotomy raises questions about the broader implications for the AI ecosystem, as restrictive policies may hinder technological advancement and innovation.
Samsung’s high bandwidth memory chips HBM3 have been approved by Nvidia for use in its AI processors, specifically for the H20 chip developed for the Chinese market, in compliance with the US export controls. Samsung may begin supplying these chips to Nvidia starting in August.
Despite Samsung being one of the world’s largest memory chip manufacturers, it still needed help to get Nvidia to certify its HBM chips. It is still being determined if Nvidia will use Samsung’s HBM3 chips in its other AI processors or if further testing is required. Meanwhile, Samsung’s fifth-generation HBM3E chips are still being tested to meet Nvidia’s standards.
Why does it matter?
AI chips require large amounts of high-speed memory, and HBM is a type of dynamic random access memory (DRAM) with a uniquely stacked memory chip design, which provides the necessary speed and capacity. Although HBM was introduced in 2013, its demand has risen drastically with the AI boom in recent years. Currently, only Micron, Samsung, SK Hynix manufacture HBM chips, and Nvidia have already certified HBM3 chips from Micron and SK Hynix, but there remains a shortage. Thus, Nvidia’s decision to approve Samsung’s HBM3 chips enables Nvidia to expand its supply chain and meet the deficit demand.
