Chip War: Banned NVIDIA GPUs Trickle into China, TSMC Shares Jump on AI

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The advanced chips sector and its geopolitical significance is in the news this week as a Reuters story reports that “Chinese military bodies, state-run artificial intelligence research institutes and universities have over the past year purchased small batches of NVIDIA semiconductors,” including the coveted H100 GPU accelerator, banned from export to the Chinese market.

“Small batches” translates to putchases typically of less than 10 chips, according to the story, “far from what’s needed to build a sophisticated AI large language model from scratch.” The largest reported acquisition was by Tsinghua University, which Reuters reported has acquired 80 A100 chips.

“The sales by largely unknown Chinese suppliers highlight the difficulties Washington faces, despite its bans, in completely cutting off China’s access to advanced U.S. chips that could fuel breakthroughs in AI and sophisticated computers for its military,” Reuters reported.

At the same time, shares of Taiwan Semiconductor Manufacturing Company, rallied based on an optimistic AI chip outlook despite concerns over the future of relations between Taiwan and the People’s Republic of China after Taiwan’s presidential elections last week. TSMC is NVIDIA’s top manufacturing supplier.

TSMC reported fourth quarter revenue of $19.62 billion, a 1.5 percent YoY decrease but a 13.6 percent increase from Q3. Looking at its advanced technologies – defined as 3nm, 5nm and 7nm chips – those processors accounted for 67 percent of total wafer revenue, TSMC said.

TSMC stock has risen more than 10 percent over the past two trading days, hitting a high of $111.32.

Reuters said its story on NVIDIA chips is based on a review it did of tender documents. NVIDIA, meanwhile, told the news service that it complies with “export control laws and requires its customers to do the same.”

“If we learn that a customer has made an unlawful resale to third parties, we’ll take immediate and appropriate action,” an NVIDIA spokesperson told Reuters.

Exports to China and Hong Kong of the A100 and H100 GPUs were banned in September 2022; last October, the Biden Administration also announced bans of the less powerful A800 and H800 microprocessors.

Reuters said buyers of the chips range from universities to two organizations on the U.S. export restriction Entity List, the Harbin Institute of Technology and the University of Electronic Science and Technology of China, which are thought to be involved with the PRC military.

The news service also noted that the demand for NVIDIA chips “underlines the lack of good alternatives for Chinese firms despite the nascent development of rival products” from Chinese technology companies. “Prior to the bans, Nvidia commanded a 90 percent share of China’s AI chip market,” Reuters stated.

Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology, (and a guest on the @HPCpodcast in November 2022) said it was “unrealistic to think U.S. export restrictions could be watertight given that chips are small and can easily be smuggled,” Reuters reported. “The main aim is ‘to throw sand in the gears of China’s AI development’ by making it difficult to build large clusters of advanced chips capable of training AI systems,” Miller added.

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