China remains crucial for U.S. chipmakers amid rising tensions between the world’s top two economies
US-China chip war graphic
Wong Yu Liang | Moment | Getty Images
China remains an essential market for most American chipmakers despite Washington’s efforts to restrict chip sales to the country and amid Beijing’s push for self sufficiency in the semiconductor sector.
Data from S&P Global showed that U.S. chip giants Intel, Broadcom, Qualcomm and Marvell Technology all generate more revenue from China compared with the U.S.
The U.S. has passed a series of export controls starting in October 2022 aimed at restricting China’s access to advanced chip technology, particularly those used in AI applications.
“China remains an important market for U.S. chipmakers, and the U.S. restrictions on selling advanced AI chips to China have been designed specifically to allow most U.S. firms to continue selling most types of chips to Chinese customers,” Chris Miller, author of “Chip War,” told CNBC.
Used in a wide range of products, from smartphones to electric vehicles, semiconductors have become a top priority for governments globally.
According to data from tech consultancy Omdia, China consumes nearly 50% of the world’s semiconductors as it is the biggest market for assembling consumer devices.
U.S. chipmakers, which enjoy technological leadership over Chinese competitors, have been able to tap this demand as the U.S. export curbs are focused on some very specific products.
“There are still plenty of ‘high end’ chips with all types of allowable use cases that are good to go where U.S. based chip companies have the dominant, leading edge,” said William B. Bailey, lead technology, media, and telecommunications analyst at Nasdaq IR Intelligence.
Navigating export curbs
U.S. chipmakers, even those with a majority of business in the U.S., such as Micron Technology, AMD, and Nvidia, have strived to serve their Chinese clients even in the face of export controls.
When the first wave of U.S. restrictions came into effect late in 2022, Nvidia and Intel designed modified versions of AI chip products for the Chinese market.
A year later, the U.S. updated the export rules to tackle these perceived loopholes. But, soon after, it was reported that Nvidia was working on a new chip made for China.
Intel has reportedly continued to sell hundreds of millions of dollars worth of laptop processor chips to U.S.-sanctioned Chinese telecoms company Huawei, thanks to an export license issued by the Donald Trump administration.
The company did not respond to a request for comment on their plans for the China market.
AMD has also designed an AI chip for China but will need to apply for an export license after failing to get it past U.S. regulators last month.
Executives of Intel, Qualcomm, and Nvidia, had reportedly been part of a group that planned to lobby Washington against tighter chip restrictions in July last year.
The companies are also members of Semiconductor Industry Association, a major U.S. semiconductor trade organization, which released a statement around the same time requesting an easing of tensions and a halt on further sanctions due to the importance of the Chinese market for domestic chip companies.
Amid a tough policy stance by the U.S., China has also responded in kind. In May last year, chips produced by America’s Micron were banned from critical information infrastructure in China after failing a review by the country’s Cyberspace Administration.
Micron is constructing a new assembly and test manufacturing facility at an existing site in Xi’an, China, as the country “remains an important market for Micron and the semiconductor industry,” a company spokesperson told CNBC. Production is estimated to start in the second half of 2025, they said.
Market share worries
China has been striving for self-reliance by building its domestic semiconductor industry in response to countries such as the U.S. and the Netherlands limiting its access to advanced technology.
Beijing has doled out billions of yuan in subsidies to its chip firms in a bid to boost domestic manufacturing.
An analysis of Huawei’s Mate 60 Pro smartphone by TechInsights revealed an advanced chip made by China’s top chip maker, SMIC. The smartphone is also said to be equipped with 5G connectivity – U.S. sanctions aimed to block Huawei from accessing this technology.
The Chinese government is “increasingly focused” on getting its firms to buy locally made chips, Miller said. “Unless foreign companies have a substantial technological advantage over domestic Chinese competitors, they will lose market share in China.”
However, Phelix Lee, equity analyst at Morningstar, said it does not expect “an overhaul of the supply chain” even as Chinese firms could be innovating legacy chips found in everything from household appliances to medical equipment.
Legacy chips are typically mature or lower-end semiconductors. U.S. Commerce Secretary Gina Raimondo said about 60% of these chips are manufactured by China.
According to Brady Wang, associate director at Counterpoint Research, in the AI GPU market segment, American companies such as Nvidia and Intel are estimated to have a technological lead of about three to five years over Chinese competitors.
“We believe China can still build up its local GPU supply chain for specific market segments, but the amount will be limited, and the cost will be much higher,” he added.
Jakub Porzycki | Nurphoto | Getty Images
LONDON — Britain’s financial services watchdog on Monday announced a new tie-up with U.S. chipmaker Nvidia to let banks safely experiment with artificial intelligence.
The Financial Conduct Authority said it will launch a so-called Supercharged Sandbox that will “give firms access to better data, technical expertise and regulatory support to speed up innovation.”
Starting from October, financial services institutions in the U.K. will be allowed to experiment with AI using Nvidia’s accelerated computing and AI Enterprise Software products, the watchdog said in a press release.
The initiative is designed for firms in the “discovery and experiment phase” with AI, the FCA noted, adding that a separate live testing service exists for firms further along in AI development.
“This collaboration will help those that want to test AI ideas but who lack the capabilities to do so,” Jessica Rusu, the FCA’s chief data, intelligence and information officer, said in a statement. “We’ll help firms harness AI to benefit our markets and consumers, while supporting economic growth.”
The FCA’s new sandbox addresses a key issue for banks, which have faced challenges shipping advanced new AI tools to their customers amid concerns over risks around privacy and fraud.
Large language models from the likes of OpenAI and Google send data back to overseas facilities — and privacy regulators have raised the alarm over how this information is stored and processed. There have meanwhile been several instances of malicious actors using generative AI to scam people.
Nvidia is behind the graphics processing units, or GPUs, used to train and run powerful AI models. The company’s CEO, Jensen Huang, is expected to give a keynote talk at a tech conference in London on Monday morning.
Last year, HSBC’s generative AI lead, Edward Achtner, told a London tech conference he sees “a lot of success theater” in finance when it comes to artificial intelligence — hinting that some financial services firms are touting advances in AI without tangible product innovations to show for it.
He added that, while banks like HSBC have used AI for many years, new generative AI tools like OpenAI’s ChatGPT come with their own unique compliance risks.
Sam Altman’s identity verification venture World is launching its eye-scanning Orb product in the U.K.
World
LONDON — World, the biometric identity verification project co-founded by OpenAI CEO Sam Altman, is set to launch in the U.K. this week.
The venture, which uses a spherical eye-scanning device called the Orb to scan people’s eyes, will become available in London from Thursday and is planning to roll out to several other major U.K. cities — including Manchester, Birmingham, Cardiff, Belfast, and Glasgow — in the coming months.
The project aims to authenticate the identity of humans with its Orb device and prevent the fraudulent abuse of artificial intelligence systems like deep fakes.
It works by scanning a person’s face and iris and then creating a unique code to verify that the individual is a human and not an AI.
Once someone has created their iris code, they are then gifted some of World’s WLD cryptocurrency and can use an anonymous identifier called World ID to sign into various applications. It currently works with the likes of Minecraft, Reddit and Discord.
From ‘science project’ to reality
Adrian Ludwig, chief architect of Tools for Humanity, which is a core contributor to World, told CNBC on a call that the project is seeing significant demand from both enterprise users and governments as the threat of AI to defraud various services — from banking to online gaming — grows.
“The idea is no longer just something that’s theoretical. It’s something that’s real and affecting them every single day,” he said, adding that World is now transitioning “from science project to a real network.”
The venture recently opened up shop in the U.S. with six flagship retail locations including Austin, Atlanta, Los Angeles, Nashville, Miami and San Francisco. Ludwig said that looking ahead, the plan is to “increase the number of people who can be verified by an order of magnitude over the next few months.”
Ever since its initial launch as “Worldcoin” in 2021, Altman’s World has been plagued by concerns over how it could affect users’ privacy. The startup says it addresses these concerns by encrypting the biometric data collected and ensuring the original data is deleted.
On top of that, World’s verification system also depends on a decentralized network of users’ smartphones rather than the cloud to carry out individual identity checks.
Still, this becomes harder to do in a network with billions of users like Facebook or TikTok, for example. For now, World has 13 million verified users and is planning to scale that up.
Ludwig argues World is a scalable network as all of the computation and storage is processed locally on a user’s device — it’s only the infrastructure for confirming someone’s uniqueness that is handled by third-party providers.
Digital ID schemes
Ludwig says the way technology is evolving means it’s getting much easier for new AI systems to bypass currently available authentication methods such as facial recognition and CAPTCHA bot prevention measures.
He sees World serving a pertinent need in the transition from physical to digital identity systems. Governments are exploring digital ID schemes to move away from physical cards.
However, so far, these attempts have been far from perfect.
One example of a major digital identity system is India’s Aadhaar. Although the initiative has seen widespread adoption, it has also been the target of criticisms for lax security and allegedly worsening social inequality for Indians.
“We’re beginning to see governments now more interested in how can we use this as a mechanism to improve our identity infrastructure,” Ludwig told CNBC. “Mechanisms to identify and reduce fraud is of interest to governments.”
The technologist added that World has been talking to various regulators about its identity verification solution — including the Information Commissioner’s Office, which oversees data protection in the U.K.
“We’ve been having lots of conversations with regulators,” Ludwig told CNBC. “In general, there’s been lots of questions: how do we make sure this works? How do we protect privacy? If we engage with this, does it expose us to risks?”
“All of those questions we’ve been able to answer,” he added. “It’s been a while since we’ve had a question asked we didn’t have an answer to.”
Tesla displays Optimus next to two of its vehicles at the World Robot Conference in Beijing on Aug. 22, 2024.
CNBC | Evelyn
Tesla’s vice president of Optimus robotics, Milan Kovac, said on Friday that he’s leaving the company.
In a post on X, Kovac thanked Tesla CEO Elon Musk and reminisced about his tenure, which began in 2016.
“I want to thank @elonmusk from the bottom of my heart for his trust and teachings over the decade we’ve worked together,” Kovac wrote. “Elon, you’ve taught me to discern signal from noise, hardcore resilience, and many fundamental principles of engineering. I am forever grateful. Tesla will win, I guarantee you that.”
Tesla is developing Optimus with the aim of someday selling it as a bipedal, intelligent robot capable of everything from factory work to babysitting.
In a first-quarter shareholder deck, Tesla said it was on target for “builds of Optimus on our Fremont pilot production line in 2025, with wider deployment of bots doing useful work across our factories.”
During Tesla’s 2024 annual shareholder meeting, Musk characterized himself as “pathologically optimistic,” then claimed the humanoid robots would lift the company’s market cap to $25 trillion at an unspecified future date.
In recent weeks, Musk told CNBC’s David Faber that Tesla is now training its Optimus systems to do “primitive tasks,” like picking up objects, open a door or throw a ball.
Competitors in the space include Boston Dynamics, Agility Robotics, Apptronik, 1X and Figure.
Kovac had previously served as the company’s director of Autopilot software engineering. He rose to lead the company’s Optimus unit as vice president in 2022.
Musk personally thanked Kovac for his “outstanding contributions” to the business.
Tesla didn’t respond to a request for comment.
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