SHANGHAI: Nearly every major IT business operating public clouds or cutting-edge artificial intelligence training modules in the nation is expected to be impacted by a US directive banning sale of some advanced semiconductors to China, according to analysts.
Nvidia Corp, a chip manufacturer, claimed on Wednesday that US officials had ordered it to cease sending two of the best processing chips for AI development to China.
Additionally, Advanced Micro Devices announced that it had been issued new licence restrictions that would prevent the sale of its cutting-edge AI chip, designated MI250, to China.
A representative for the Chinese Commerce Ministry, Shu Jueting, stated on Thursday that Beijing opposes the regulations because they threaten to disrupt global supply chains and violate the rights of Chinese businesses.
The directives highlight escalating tensions between the US and China for access to cutting-edge microprocessor technology.
According to Jay Goldberg, CEO of D2D Advisory, a finance and strategy consulting company, "We’re going from blocking certain US companies from supplying to a certain company, as was the case with Huawei, to banning certain US products from selling to China period."
The worst-case scenario, according to analysts at Jefferies, would be if Washington expanded the embargo to prevent contract chipmakers like Taiwan Semiconductor Manufacturing Co. and Samsung from producing semiconductors for Chinese chip designers.
It said "We are not there yet, and the US will likely evaluate the effectiveness of each incremental step before drastic action is considered."
Market observers predict that a large number of Chinese IT heavyweights, including Alibaba Group Holding Ltd, Tencent Holdings Ltd, Baidu Inc., and Huawei Technologies Co Ltd., will be negatively impacted by the most recent ban.
Affected companies might employ several low-end chips to mimic the processing capacity of the outlawed, high-end chips, or rely on cloud services like Alphabet Inc.'s Google or Amazon.com Inc.'s AWS to develop AI software and ship it back to China, according to Jefferies.
According to a former senior employee of AMD in China, the limits won't prevent Chinese tech companies from furthering their AI research, but they will increase costs and decrease efficiency in the short run.
He informed Reuters, "It's a resource impact. They will still work on the same projects, they will still be moving forward, it just slows them down."
Requests for comment from Reuters were not immediately answered by Alibaba, Tencent, or Baidu. Huawei opted not to respond.
The AI and machine learning applications that the Nvidia and AMD chips targeted by Washington are used, primarily for creating training modules for tasks like natural language processing.
The military might find these components helpful for constructing weapons and simulating bombs.
Few Chinese companies, according to Goldberg at D2D, could produce AMD and Nvidia replacement chips rapidly, and the limits would probably encourage greater funding for domestic chip startups to close the gap with US companies.
Many startups with the goal of competing with Nvidia and AMD are based in China. Former employees of these organizations started a lot of them, but few have grown to a significant size.
Hygon Information Technology Co. and Loongson Technology Corp., two Chinese manufacturers of AI chips, saw their shares soar on Thursday, increasing 10% and 6%, respectively.
A 7nm device, which experts say represents significant advancement for China's semiconductor industry, was introduced last week by Biren, a business created by former employees of Nvidia and Alibaba.
The order books of the several dozen Chinese chip companies developing various types of AI accelerators will be filled tomorrow, according to Goldberg.
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