Meanwhile, in response to chip availability constraints, several Chinese city governments have committed to offering “computing vouchers” to subsidize AI startups grappling with escalating data center costs.
Highlighting the geopolitical strain on the tech industry, AMD’s bid to secure US government clearance for its China-specific, lower-performance chips has hit a wall.
US authorities have told AMD that the chip exceeded power limits and mandated that the company secure a license from the Commerce Department’s Bureau of Industry and Security for its sale, Bloomberg reported.
This comes as rival Nvidia mentioned in its recent earnings call that the US restrictions had forced the company to pause its offerings to China, affecting the operations in the region.
Meanwhile, in response to chip availability constraints, several Chinese city governments have committed to offering “computing vouchers” to subsidize AI startups grappling with escalating data center costs, according to the Financial Times.
Regulations to increase competition
Analysts pointed out that the immediate impact of such stringent US regulations could be increased competition between the two major chipmakers, Nvidia and AMD. This is significant as both companies are seeing their values skyrocket as markets expect massive demand for AI chips.
Galen Zeng, senior research manager at IDC Asia/Pacific Semiconductor Research, pointed out that AMD and Nvidia are forced to innovate and create new products that comply with US export controls while still meeting the demands of the Chinese market. This could lead to increased competition between these companies as they strive to develop chips that are powerful yet compliant with regulations.
“It will give other vendors’ products, such as Intel’s CPUs, GPUs, FPGA, ASICs from major CSP, and AI chips from Chinese fabless companies, an opportunity to catch up with Nvidia or AMD’s current level of single-chip performance,” Zeng said. “But, in addition to single-chip performance, Nvidia and AMD still have advantages when it comes to new products, interconnect solutions, and AI model technology in the future.”
Another point to note here is that AMD already has a weak presence in China. Manish Rawat, a semiconductor analyst at Techinsights, pointed out that the latest hurdle could prompt rivals to take advantage of this to solidify their position in the market and increase their market share.
“Meanwhile, Chinese tech firms may accelerate efforts to develop indigenous AI chip technologies, intensifying competition in the long run,” Rawat said. “Increased R&D spending by companies is probably going to result from this heightened competitiveness, which will also spur greater innovation overall. The decision may, strategically speaking, heighten tensions between the US and China and trigger retaliatory actions that might harm US tech companies operating in China.”
Effectiveness of the restrictions
Perhaps a more significant question is the success of US restrictions in denying Chinese companies access to the most advanced technology.
The FT report pointed out that the Chinese government’s initiative to assist AI startups was prompted by internet companies and cloud service providers terminating contracts. This shift occurred as tighter US regulations led these companies to reserve GPUs for their own use.
Chinese tech behemoths Alibaba, Tencent, and ByteDance are restricting the rental of Nvidia’s GPUs, keeping the bulk of their hoarded AI processors for in-house applications and key customers.
“In the short term, US export controls can effectively limit the spread of cutting-edge technologies to certain countries, achieving immediate policy goals such as ‘national security,’” Zeng said. “Although the US Department of Commerce is not willing to see this, the US fabless companies can still innovate within these rules, as seen by Nvidia’s and AMD’s efforts to develop less powerful AI chips tailored for the Chinese market. This approach allows them to maintain a presence in restricted markets.”
Moreover, this could lead to resistance from companies that are outside the US but still affected by the restrictions.
“Companies in restricted countries may accelerate their own R&D efforts to bypass dependencies on US technology, leading to innovations that might eventually circumvent US controls,” Zeng added. “Just like many small fabless companies will find non-US IC design service providers to create new projects for their AI ASIC.”
Strict laws can make US companies less competitive abroad by preventing them from accessing markets and collaborating with other companies, according to Rawat.
“Navigating complicated regulatory systems and taking resources away from innovation is part of compliance,” Rawat said. “Companies can still develop inside regulatory boundaries despite obstacles if they concentrate on partnerships or compatible technology.”
