[Taiwan Chip News] Will China's AI Stop... New Phase in US-China Semiconductor War with Trump's Return

Technology Blockade Below 7nm
Impact on China's Advanced Industries

With former President Donald Trump elected as the President of the United States, a new semiconductor war has begun between the U.S. and China. This change is expected to have a significant impact on the Chinese artificial intelligence (AI) industry, including companies like Alibaba.

According to industry sources on the 16th, the U.S. has banned the export of advanced semiconductors under 7nm (nanometer = one billionth of a meter) used in AI accelerators to China, which means Samsung Electronics and TSMC can no longer provide advanced semiconductor foundry services to China. Currently, companies capable of producing semiconductors under 7nm are limited to Samsung Electronics, TSMC, and Intel. Although SMIC, China’s largest foundry company, claims to have mass production capability at 7nm, it still faces limitations in terms of economic scale and efficiency. The industry expects that with all these major semiconductor companies under U.S. sanctions, the U.S.-China semiconductor conflict will intensify further.

The company expected to suffer the greatest damage is PingTouGe, an AI semiconductor subsidiary of Alibaba. Founded in September 2018, PingTouGe has rapidly grown with 100% investment from Alibaba Group and has been developing the ‘Yitian’ semiconductor using advanced processes below 5nm. Following Huawei, Alibaba, one of China’s top three internet companies known as ‘BAT (Baidu, Alibaba, Tencent),’ has also come under the scrutiny of the U.S. White House. Other emerging Chinese AI semiconductor startups such as Bitmain and Cambricon are also expected to be affected. Cambricon is an AI chip developer that originated from a research institute under the Chinese Academy of Sciences.

On the other hand, some companies are showing a more relaxed attitude despite U.S. sanctions. At the ‘2024 Baidu World Conference’ held on the 12th, Baidu Chairman Robin Li emphasized, "We are the leader in China’s AI," highlighting the growth of their AI model ‘Wenxin Big Model.’ He stated, "The daily average usage of Wenxin Big Model has exceeded 1.5 billion, increasing more than 7.5 times in just half a year." Additionally, Baidu is looking for opportunities to establish itself as a cooperation partner for Apple’s AI system, ‘Apple Intelligence,’ within China.

Inventec, Baidu’s AI server contract manufacturing partner based in Taiwan, reported that "orders from Chinese customers are surging." Inventec said that demand for AI servers has remained strong this quarter, with the largest increase in orders coming from Chinese clients. This indicates that Baidu is actively advancing its AI system development.

Industry insiders analyze Baidu’s continued investment in AI business by stating, "Before the U.S. sanctions, Baidu secured sufficient AI semiconductors and is trying to minimize the impact of sanctions by purchasing downgraded products from NVIDIA and AMD."

However, Baidu may also face growth limitations if U.S. sanctions are prolonged. Baidu’s first-generation AI semiconductor ‘Kunlun 1’ was produced using Samsung Electronics’ 14nm process, and the second-generation ‘Kunlun 2’ was contract-produced using TSMC’s 7nm process, which is subject to U.S. sanctions.

In the new phase of the U.S.-China semiconductor war, Chinese companies are ultimately forced to rely on downgraded U.S.-made products. TSMC has already notified all its Chinese AI semiconductor customers that it will stop supplying technology below 7nm, and Samsung Electronics is also reported to have communicated similar information to its Chinese customers.

Foreign media reported that the U.S. Department of Commerce sent an official letter to TSMC confirming these details. On the 8th, TSMC stated, "As a law-abiding company, we are committed to fully complying with all applicable laws and regulations, especially export control laws." Samsung Electronics has not issued an official statement regarding these market rumors.

Taiwan Economic Daily News ? Reported by In Huizhong and Lin Yilu / Translated by Asia Economy