While the Cold War with the Soviet Union was a nuclear arms race,
the Cold War with China is being fought in digital space.
In late August, Washington restricted sales of sophisticated chips
to China and Russia. (August 26 - informed NVIDIA)
The two top Silicon Valley chip designers, NVIDIA and Advanced Micro Devices, have been
told to limit sales of their high-end chips known as graphics processing units or GPUs.
GPUs were originally developed to render images in video games
but are now used in supercomputers that recognize speech and identify objects in photographs.
In other words, they can be used for artificial intelligence gathering.
The People’s Daily, the mouthpiece of China’s Communist Party,
claimed on its Twitter account that the country’s facial recognition system could scan the faces
of China’s 1.4 billion citizens in just one second. And by the way, this tweet was in 2018.
NVIDIA, the largest GPU maker by far, confirmed that the U.S. federal government now requires
the company to seek export licenses to sell two types of high-end chips:
the A100 and the upcoming H100, and any future chips equivalent in performance.
For AMD, the affected chip is the MI250.
These processors help “accelerate” the most intensive parts of machine learning used in AI.
In an SEC filing, NVIDIA revealed that the U.S. government fears there is a risk
that the products “may be used in or diverted to a “military end use” in China and Russia.
Both companies do not currently sell to Russia.
NVIDIA’s statement indicates it does not expect licenses to be granted in most cases
and could take a $400 million dollar hit this quarter.
Beijing is clearly not happy about the restrictions.
A Chinese foreign ministry official said the U.S. is trying to impose a “technological blockade” on
China and that the restrictions show America is trying to maintain its “technological hegemony”.
Reuters quoted the U.S. Department of Commerce
as saying the restrictions are meant to "keep advanced technologies out of the wrong hands.”
These restrictions come shortly after the Biden administration offered billions in subsidies
to a Taiwanese company IF it agrees not to sell its most advanced semiconductor chips to China.
Taiwan Semiconductor Manufacturing Company makes the most advanced
chips for nearly every company on earth, including Nvidia and AMD.
Although TSMC has factories in China and one in the U.S.,
its most advanced factories are in Taiwan…for security reasons. I did
a story about the importance of TSMC which I’ll link in my description.
TSMC is now building a $12 billion dollar factory in Arizona so it’s no surprise that
Arizona’s governor Doug Ducey is the latest American politician to cozy up to Taiwan.
He flew there to meet with Taiwanese President Tsai Ing-wen.
Chinese firms are making their own semiconductor chips, though they are a generation or two
Not to mention in 2019, the Trump administration lobbied
the Dutch government to block the shipment of cutting-edge machines
that are an essential component in printing chips for TSMC and other chipmakers.
The Dutch firm ASML is the only company in the world making the $150 million dollar machines
that pattern the finest lines on the most advanced chips.
The Biden administration has been pushing ASML to stop shipping even its less sophisticated systems
to China, which would seriously hurt Chinese firms that are producing their own semiconductor chips.
These new U.S. restrictions involving Nvidia and AMD
are another attempt to hamper China’s technological capabilities.
Without integrated units from those two companies, Chinese firms will
find it more difficult to implement advanced computing for speech and image recognition.
These processors are commonly found in smartphones,
for example, to identify people in photos.
However, they also have military uses.
Such as scouring satellite imagery for weapons or military bases.
Or listening to communications and monitoring faces for intelligence-gathering purposes.
Washington has argued that products sold in the Chinese marketplace are
ending up in the hands of the Chinese military.
For example, Nvidia and Intel sold chips to Sugon, a Chinese firm that
makes computers for various companies but also supplies them to the Chinese military.
A report in 2020 by the New York Times raised concerns that these chips are
powering a supercomputing center that conducts mass surveillance in China’s
northwestern Xinjiang province to track Uighurs and other Muslim minorities.
Both Intel and Nvidia told the Times they were unaware of what they called
the misuse of their technology.
In 2016, a Chinese police surveillance project called Sharp Eyes had the ambitious plan of
being able to monitor 100% of all public spaces in China by 2020 - even the vast rural areas.
There is no word on how far they’ve come in achieving this goal.
Although the blockade is meant to prevent American technology
from being used by America’s military rival, AI chips have wide applications.
Companies like Alibaba,
Baidu, and Tencent use them in their data centers to process large volumes of data.
Now, they’ll have to make do with lower-performance GPUs that could slow them down.
So, there are broader implications for society.
Or, perhaps, it is inevitable that China will begin producing its own
high-end GPUs and become self-reliant.
It may only be a matter of time.
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