REUTERS
"Exclusive: US tackles loopholes in curbs on AI chip exports to China"
By Karen Freifeld
October 16, 2023
Oct 15 (Reuters) - The U.S. will take steps to prevent American chipmakers from selling semiconductors to China that circumvent government restrictions, a U.S. official said, as part of the Biden administration's upcoming actions to block more AI chip exports.
The new rules, details of which Reuters is reporting for the first time, will be added to sweeping U.S. restrictions on shipments of advanced chips and chipmaking equipment to China unveiled last October.
The updates are expected this week, other people familiar with the matter said, though such timetables often slip.
The new rules will block some AI chips that fall just under current technical parameters while demanding companies report shipments of others, said the official, who provided information on condition of anonymity.
A spokesperson for the U.S. Department of Commerce, which oversees export controls, declined to comment.
The latest crackdown on tech exports to China coincides with U.S. efforts to thaw difficult relations between the world's two largest economies.
Several senior members of the Biden administration have met their Chinese counterparts in recent months, and the latest round of rules risks complicating the diplomatic effort.
The Biden administration has said it designed the export curbs to keep U.S. chips and equipment from strengthening China's military.
Beijing has accused the United States of abusing export controls to suppress Chinese companies.
The restrictions marked a historic shift in U.S.-China tech policy.
"The U.S. needs to stop politicizing and weaponizing trade and tech issues and stop destabilizing global industrial and supply chains," China's foreign ministry spokesperson Mao Ning said on Monday.
"We will closely follow the developments and firmly safeguard our rights and interests."
Last year, government restrictions kept Nvidia, the world's most valuable chipmaker, from shipping two of its most advanced AI chips to Chinese customers, chips that have become the industry standard for developing chatbots and other AI systems.
But Nvidia soon released new variants for the Chinese market that were less sophisticated and got around the U.S. export controls.
One, named the H800, has as much computing power at some settings used in AI work as the company's more powerful but blocked H100 chip.
Still, some key performance aspects are limited, according to a specification sheet seen by Reuters.
NEW RESTRICTIONS
The U.S. now plans to introduce new guidelines for AI chips that will restrict certain advanced data center AI chips that are not currently captured, the U.S. official said.
While the official declined to identify which additional chips will be effectively banned, Nvidia's H800 is a semiconductor sources have suggested the administration has wanted to block.
A spokesperson for Santa Clara, California-based Nvidia declined comment.
In June the company's chief financial officer said that if the H800 and a related chip called the A800 were restricted, they did not anticipate it "would have an immediate material impact on our financial results."
Chips meant for consumer products like laptops will be exempt from the new curbs, the official said.
But companies will need to tell the Commerce Department when they are filling orders for the most powerful consumer chips to make sure they are not being used in ways that threaten national security, according to the official.
In order to keep AI chips the U.S. views as too powerful from China, the official said the U.S. planned to stop taking into account one of the parameters - the "bandwidth parameter" - it has been using to determine which types of AI data center chips to restrict.
A bandwidth, or interconnect, parameter is a measure of how fast chips talk to each other.
Under the current thresholds, a chip had to exceed both a performance speed and a bandwidth threshold to be restricted.
By removing the bandwidth parameter, a chip will soon be restricted if it exceeds a certain performance speed alone – in other words, how powerful each chip is.
It will also be restricted if it exceeds another measurement, a certain “performance density,” to help prevent future workarounds, the official said, declining to elaborate further.
EVOLVING TECHNOLOGY
The updated rules also are meant to cover AI chips as technology evolves.
The U.S. will require companies to notify the government about semiconductors whose performance is just below the guidelines before they are shipped to China, the official said.
The government will decide on a case-by-case basis whether they pose a national security risk but they can be shipped unless the chipmaker is told otherwise.
The updates to the October 2022 rules may also close a loophole that gives Chinese companies access to American artificial intelligence chips through Chinese units located overseas, as Reuters reported last week.
The rules are not expected to include restrictions on access to U.S. cloud computing services, or those of allies, but the U.S. will seek comments on the risks of such access and how they might be addressed, the official said.
The Biden administration told Beijing of its plans to update the contentious rules this month, Reuters reported earlier in October, as part of a policy aimed at stabilizing relations between the superpowers.
https://www.reuters.com/technology/upco ... 023-10-15/
CHINA
Re: CHINA
REUTERS
"Biden cuts China off from more Nvidia chips, expands curbs to other countries"
By Alexandra Alper, Karen Freifeld and Stephen Nellis
October 17, 2023
WASHINGTON, Oct 17 (Reuters) - The Biden administration plans to halt shipments to China of more advanced artificial intelligence chips designed by Nvidia and others, part of a raft of measures released on Tuesday that seek to stop Beijing from receiving cutting-edge U.S. technologies to strengthen its military.
The rules, which go into effect in 30 days, restrict a broader swathe of advanced chips and chipmaking tools to a greater number of countries including Iran and Russia, and blacklist Chinese chip designers Moore Threads and Biren.
The new measures close loopholes in regulations released last October and will probably be updated "at least annually," Commerce Department Secretary Gina Raimondo told reporters late on Monday.
The goal is to limit China's access to "advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to (Chinese) military applications," she said, stressing the administration was not seeking to hurt Beijing economically.
She said China will still import hundred of billions of dollars worth of U.S. semiconductors.
A spokesperson for the Chinese embassy said it "firmly opposes" the new restrictions, adding that "arbitrarily placing curbs or forcibly seeking decoupling to serve (a) political agenda violates the principles of market economy and fair competition (and) undermines the international economic and trading order."
REPORT FINDS U.S. AI FEEDS CHINA'S MILITARY
The new measures demonstrate the Biden administration is struggling to slow the flow of chips and chipmaking tools into China, even as concerns mount over the role U.S. technology is playing in modernizing Beijing's military.
Reuters reported in June that the very AI chips barred by prior regulations could be purchased from vendors in China's Shenzhen.
Georgetown University's Center for Security and Emerging Technology found in a June 2022 report that out of 97 individual AI chips procured via Chinese military tenders over an 8-month period in 2020, nearly all of them were designed by Nvidia, Xilinx, Intel, and Microsemi.
AI capabilities, aided by supercomputing and advanced chips, improve the speed and accuracy of military decision-making, planning and logistics, according to the regulations released Tuesday.
CHINA-ONLY CHIPS HIT
In a statement following publication of the rules, top U.S. AI chip designer Nvidia said it complies with regulations and does not expect a meaningful hit to near-term results.
Nvidia's business has soared since the imposition of last year's rules because its China-only chips are still better than alternatives.
The firm is currently selling almost every chip it can procure as worldwide demand outstrips supply, but would be hurt in the long term as Chinese chip firms look elsewhere to fill any voids left by U.S. companies.
The company has made chips such as the A800 and H800 that walked up to the line of the previous rules to continue selling to China, and AMD, also impacted by the rules, has said it plans a similar strategy.
Nvidia's shares fell 3.7%, while shares in AMD and another rival AI chipmaker, Intel, slid 0.6% and 1% respectively.
The new rules will exempt most consumer chips used in laptops, smartphones and gaming, though some will be subject to licensing and notification requirements by U.S. officials.
TAKING ON CHIPLET TECHNOLOGY
The previous rules imposed a two-pronged test that measured both a chip’s computing performance and its ability to communicate with other chips, an important measure in AI supercomputers where thousands of chips are strung together to chew through huge amounts of data.
Nvidia and Intel created special chips for the Chinese market that retained the powerful computing capabilities but limited communications speeds to stay inside the previous rules.
The new rules impose limits on how much computing power a chip packs into a certain size, a measure designed to prevent workarounds using new "chiplet" technology that China has said will be central to its semiconductor industry's future.
Chinese firms Biren and Moore Threads, whose U.S. suppliers will now face a tough licensing requirement before shipping products to them, are both startups founded by former Nvidia employees and aim to compete with the U.S. AI chip giant.
Biren said it firmly opposes its blacklisting and will appeal to the U.S. government to reexamine the decision.
Moore Threads said it strongly disagrees with its addition to the trade blacklist.
LICENSING EXPANDED
The new measures also expand licensing requirements for exports of advanced chips to more than 40 additional countries that present risks of diversion to China and are subject to U.S. arms embargoes.
That measure appears to build on a letter received by Nvidia in August that it described as restricting shipments of its A100 and H100 chips beyond China to other regions including some countries in the Middle East.
Confirming a Reuters report, chips will be barred from being sent to units of firms located anywhere in the world if their parent companies are headquartered in China, Macau and other arms embargoed countries.
The Biden administration also hit 21 countries outside China with a licensing requirement for chipmaking tools, over fears the equipment could be diverted to China and other national security concerns.
It also added to the list of equipment restricted from going to that country to include some deep ultraviolet (DUV) lithography systems, going beyond recent Dutch regulations to keep the Netherlands' ASML from sending older DUV models and spare parts to some advanced Chinese chip factories, confirming another Reuters report.
DUV is less advanced chipmaking equipment than state-of-the art extreme ultraviolet equipment (EUV), which has already been withheld from China, but can make chips nearly as advanced at greater cost.
ASML said in a statement the new measures would likely have an impact on "the regional split of our system sales" over the medium to long-term, but the company did not expect to see a "material impact" on its financial outlook for 2023 or the longer term.
Shares of rival U.S. equipment makers Lam Research was flat while Applied Materials traded up 0.6% and KLA down 1.3%.
"We don’t think incremental semiconductor equipment restrictions are likely to have significant long term effects" on equipment suppliers, Wolfe Research said in a client note.
KLA declined to comment.
Lam and Applied did not immediately respond to requests for comment.
U.S. officials said Chinese counterparts were warned the rules were coming by Raimondo, National Security Advisor Jake Sullivan, and Treasury Secretary Janet Yellen, confirming a Reuters report.
The Semiconductor Industry Association said in a statement it was "evaluating the impact" of the new rules and urged the administration to work with allies.
"Overly broad, unilateral controls risk harming the U.S. semiconductor ecosystem without advancing national security," the group said.
https://www.reuters.com/technology/bide ... 023-10-17/
"Biden cuts China off from more Nvidia chips, expands curbs to other countries"
By Alexandra Alper, Karen Freifeld and Stephen Nellis
October 17, 2023
WASHINGTON, Oct 17 (Reuters) - The Biden administration plans to halt shipments to China of more advanced artificial intelligence chips designed by Nvidia and others, part of a raft of measures released on Tuesday that seek to stop Beijing from receiving cutting-edge U.S. technologies to strengthen its military.
The rules, which go into effect in 30 days, restrict a broader swathe of advanced chips and chipmaking tools to a greater number of countries including Iran and Russia, and blacklist Chinese chip designers Moore Threads and Biren.
The new measures close loopholes in regulations released last October and will probably be updated "at least annually," Commerce Department Secretary Gina Raimondo told reporters late on Monday.
The goal is to limit China's access to "advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to (Chinese) military applications," she said, stressing the administration was not seeking to hurt Beijing economically.
She said China will still import hundred of billions of dollars worth of U.S. semiconductors.
A spokesperson for the Chinese embassy said it "firmly opposes" the new restrictions, adding that "arbitrarily placing curbs or forcibly seeking decoupling to serve (a) political agenda violates the principles of market economy and fair competition (and) undermines the international economic and trading order."
REPORT FINDS U.S. AI FEEDS CHINA'S MILITARY
The new measures demonstrate the Biden administration is struggling to slow the flow of chips and chipmaking tools into China, even as concerns mount over the role U.S. technology is playing in modernizing Beijing's military.
Reuters reported in June that the very AI chips barred by prior regulations could be purchased from vendors in China's Shenzhen.
Georgetown University's Center for Security and Emerging Technology found in a June 2022 report that out of 97 individual AI chips procured via Chinese military tenders over an 8-month period in 2020, nearly all of them were designed by Nvidia, Xilinx, Intel, and Microsemi.
AI capabilities, aided by supercomputing and advanced chips, improve the speed and accuracy of military decision-making, planning and logistics, according to the regulations released Tuesday.
CHINA-ONLY CHIPS HIT
In a statement following publication of the rules, top U.S. AI chip designer Nvidia said it complies with regulations and does not expect a meaningful hit to near-term results.
Nvidia's business has soared since the imposition of last year's rules because its China-only chips are still better than alternatives.
The firm is currently selling almost every chip it can procure as worldwide demand outstrips supply, but would be hurt in the long term as Chinese chip firms look elsewhere to fill any voids left by U.S. companies.
The company has made chips such as the A800 and H800 that walked up to the line of the previous rules to continue selling to China, and AMD, also impacted by the rules, has said it plans a similar strategy.
Nvidia's shares fell 3.7%, while shares in AMD and another rival AI chipmaker, Intel, slid 0.6% and 1% respectively.
The new rules will exempt most consumer chips used in laptops, smartphones and gaming, though some will be subject to licensing and notification requirements by U.S. officials.
TAKING ON CHIPLET TECHNOLOGY
The previous rules imposed a two-pronged test that measured both a chip’s computing performance and its ability to communicate with other chips, an important measure in AI supercomputers where thousands of chips are strung together to chew through huge amounts of data.
Nvidia and Intel created special chips for the Chinese market that retained the powerful computing capabilities but limited communications speeds to stay inside the previous rules.
The new rules impose limits on how much computing power a chip packs into a certain size, a measure designed to prevent workarounds using new "chiplet" technology that China has said will be central to its semiconductor industry's future.
Chinese firms Biren and Moore Threads, whose U.S. suppliers will now face a tough licensing requirement before shipping products to them, are both startups founded by former Nvidia employees and aim to compete with the U.S. AI chip giant.
Biren said it firmly opposes its blacklisting and will appeal to the U.S. government to reexamine the decision.
Moore Threads said it strongly disagrees with its addition to the trade blacklist.
LICENSING EXPANDED
The new measures also expand licensing requirements for exports of advanced chips to more than 40 additional countries that present risks of diversion to China and are subject to U.S. arms embargoes.
That measure appears to build on a letter received by Nvidia in August that it described as restricting shipments of its A100 and H100 chips beyond China to other regions including some countries in the Middle East.
Confirming a Reuters report, chips will be barred from being sent to units of firms located anywhere in the world if their parent companies are headquartered in China, Macau and other arms embargoed countries.
The Biden administration also hit 21 countries outside China with a licensing requirement for chipmaking tools, over fears the equipment could be diverted to China and other national security concerns.
It also added to the list of equipment restricted from going to that country to include some deep ultraviolet (DUV) lithography systems, going beyond recent Dutch regulations to keep the Netherlands' ASML from sending older DUV models and spare parts to some advanced Chinese chip factories, confirming another Reuters report.
DUV is less advanced chipmaking equipment than state-of-the art extreme ultraviolet equipment (EUV), which has already been withheld from China, but can make chips nearly as advanced at greater cost.
ASML said in a statement the new measures would likely have an impact on "the regional split of our system sales" over the medium to long-term, but the company did not expect to see a "material impact" on its financial outlook for 2023 or the longer term.
Shares of rival U.S. equipment makers Lam Research was flat while Applied Materials traded up 0.6% and KLA down 1.3%.
"We don’t think incremental semiconductor equipment restrictions are likely to have significant long term effects" on equipment suppliers, Wolfe Research said in a client note.
KLA declined to comment.
Lam and Applied did not immediately respond to requests for comment.
U.S. officials said Chinese counterparts were warned the rules were coming by Raimondo, National Security Advisor Jake Sullivan, and Treasury Secretary Janet Yellen, confirming a Reuters report.
The Semiconductor Industry Association said in a statement it was "evaluating the impact" of the new rules and urged the administration to work with allies.
"Overly broad, unilateral controls risk harming the U.S. semiconductor ecosystem without advancing national security," the group said.
https://www.reuters.com/technology/bide ... 023-10-17/
Re: CHINA
REUTERS
"ASML CEO: one more tool hit by US export rules, China demand seen strong"
By Toby Sterling
October 18, 2023
AMSTERDAM, Oct 18 (Reuters) - The chief executive of Dutch semiconductor equipment maker ASML Holding NV said on Wednesday one more of its products falls under new export restrictions rules announced by the U.S. this week.
At a press conference following the company's third quarter results, CEO Peter Wennink said he expects demand from Chinese chipmakers to remain strong, despite the growing list of export restrictions imposed by the U.S. and Dutch governments.
Wennink said that one additional ASML product not covered by Dutch export licensing rules introduced this year can now be restricted under the new U.S. export rules announced on Tuesday.
The product, ASML's 1980Di tool, can be used to help make both relatively advanced computer chips as well as mid-range and older chips.
"In principle the 1980s would fall under the export control restrictions, but only when ... (they) are used for advanced semiconductor manufacturing," Wennink said.
Only a handful of Chinese plants would be considered "advanced", he said.
ASML dominates the market for lithography equipment, used by chipmakers such as TSMC, Samsung and Intel to help create the circuitry of chips.
China is its third-largest market after Taiwan and South Korea.
But sales to China in the third quarter amounted to 46% of ASML's total, amid weaker demand from other regions and a rush by Chinese customers to ensure they have tools before Dutch restrictions fully bite.
"I don't think we will see a peak this year, I think there will be a significant amount of demand coming out of China for mature technology," Peter Wennink said at a press conference following third quarter results.
He added that the export restrictions impact around 15% of ASML's sales to China.
Earlier on Wednesday ASML warned that 2024 sales may be flat as chipmakers delay capital spending amid an uncertain economic backdrop.
Reporting by Toby Sterling; Editing by Alex Richardson and David Evans
https://www.reuters.com/technology/asml ... 023-10-18/
"ASML CEO: one more tool hit by US export rules, China demand seen strong"
By Toby Sterling
October 18, 2023
AMSTERDAM, Oct 18 (Reuters) - The chief executive of Dutch semiconductor equipment maker ASML Holding NV said on Wednesday one more of its products falls under new export restrictions rules announced by the U.S. this week.
At a press conference following the company's third quarter results, CEO Peter Wennink said he expects demand from Chinese chipmakers to remain strong, despite the growing list of export restrictions imposed by the U.S. and Dutch governments.
Wennink said that one additional ASML product not covered by Dutch export licensing rules introduced this year can now be restricted under the new U.S. export rules announced on Tuesday.
The product, ASML's 1980Di tool, can be used to help make both relatively advanced computer chips as well as mid-range and older chips.
"In principle the 1980s would fall under the export control restrictions, but only when ... (they) are used for advanced semiconductor manufacturing," Wennink said.
Only a handful of Chinese plants would be considered "advanced", he said.
ASML dominates the market for lithography equipment, used by chipmakers such as TSMC, Samsung and Intel to help create the circuitry of chips.
China is its third-largest market after Taiwan and South Korea.
But sales to China in the third quarter amounted to 46% of ASML's total, amid weaker demand from other regions and a rush by Chinese customers to ensure they have tools before Dutch restrictions fully bite.
"I don't think we will see a peak this year, I think there will be a significant amount of demand coming out of China for mature technology," Peter Wennink said at a press conference following third quarter results.
He added that the export restrictions impact around 15% of ASML's sales to China.
Earlier on Wednesday ASML warned that 2024 sales may be flat as chipmakers delay capital spending amid an uncertain economic backdrop.
Reporting by Toby Sterling; Editing by Alex Richardson and David Evans
https://www.reuters.com/technology/asml ... 023-10-18/
Re: CHINA
REUTERS
"US throws Nvidia a lifeline while choking off China's chipmaking future"
By Stephen Nellis and Max A. Cherney
October 18, 2023
SAN FRANCISCO, Oct 18 (Reuters) - While stripping China's access to key U.S. artificial intelligence chips, the Biden administration's sweeping new rules also quietly threw Nvidia, Intel and Advanced Micro Devices a potential lifeline to preserve lucrative business in one of the world's biggest chip markets.
Buried deep in more than 400 pages of rules issued on Tuesday, officials at the U.S. Bureau of Industry and Security (BIS) said they are open to the semiconductor industry's input for finding ways to keep sending AI chips to China for small and medium-sized systems.
The rules were designed to curtail China's ability to exploit American chips to build massive supercomputers that can be used to create technologies similar to OpenAI's ChatGPT and could also be used for military purposes, officials said.
Thomas Krueger, a former U.S. National Security Council export control official, said "the organizing principle for all these rules is to keep them focused on those capabilities that can enable Chinese military systems."
"They're not interested in going after broad consumer applications."
"They're really trying to thread that needle."
U.S. officials asked for input in devising a "tamperproof" way to keep systems that might contain up to 256 AI chips from being strung together into a supercomputer.
"This approach could constrain (controlled AI chips) from being used to train large dual-use AI foundation models with capabilities of concern, while allowing AI training capabilities at a small or medium scale," the BIS wrote.
Nvidia, Intel and AMD declined to comment.
Nvidia shares closed down 4.67% on Tuesday after the new rules were announced.
The other primary gift that U.S. officials gave Nvidia, Intel and AMD was hobbling their most capable Chinese competitors.
New rules will make it nearly impossible for Moore Threads and Biren, two well-funded Chinese startups founded by Nvidia veterans, to have their designs manufactured using cutting-edge chipmaking technology.
That means whatever Nvidia is able to sell to China will likely be Chinese buyers' best legal option.
"Our assumption is that (Nvidia) will quickly redesign a chip to meet new standards with relatively immaterial disruptions to the current business outlook," analysts at investment bank Piper Sandler wrote in a note to clients.
TOOL RULES TIGHTENED
As part of the new rules published on Tuesday that take effect in 30 days, U.S. officials targeted China's chip manufacturers by restricting the export of advanced chipmaking equipment known as immersion deep ultraviolet (DUV) lithography machines if they contain any American parts.
"What they're really doing is closing all the doors," TechInsights analyst Dan Hutcheson said, adding the new rules close off a substantial amount of potential future developments.
"They're basically trying to future-proof the document."
The DUV machines are not produced by any American toolmakers, but are made by Japan's Nikon and the Netherlands' ASML.
The DUV rules announced on Tuesday codified diplomatic work between the U.S., Japan and the Netherlands to institute similar controls on sending the machines to China, said Clete Willems, a trade and policy attorney with Akin Gump.
While immersion DUV machines cannot product cutting-edge chips, they can come close and are likely what was recently used by Huawei's chip manufacturing partners to create a new smartphone chip for its Mate 60 Pro, according to analysts.
"This control alone will constrain China’s ability to expand advanced node semiconductor manufacturing for many years," said Gregory Allen, a director at the Center for Strategic and International Studies.
"If spare parts and components for the equipment can be effectively controlled, the new regulations may degrade the advanced node manufacturing facilities that China currently has in operation."
Instead of the broad swaths of tools blocked by last year's export restrictions, officials on Tuesday narrowed them to target specific technologies and techniques found in the complex machines needed to build advanced transistor designs, according to David Kanter, President of Real World Insights.
By narrowing the equipment that is blocked, the rules allow the toolmakers to sell equipment that is made to build much older chips without fear of running afoul of the government restrictions.
Reporting by Stephen Nellis and Max A. Cherney in San Francisco; Editing by Kenneth Li and Jamie Freed
https://www.reuters.com/technology/us-t ... 023-10-18/
"US throws Nvidia a lifeline while choking off China's chipmaking future"
By Stephen Nellis and Max A. Cherney
October 18, 2023
SAN FRANCISCO, Oct 18 (Reuters) - While stripping China's access to key U.S. artificial intelligence chips, the Biden administration's sweeping new rules also quietly threw Nvidia, Intel and Advanced Micro Devices a potential lifeline to preserve lucrative business in one of the world's biggest chip markets.
Buried deep in more than 400 pages of rules issued on Tuesday, officials at the U.S. Bureau of Industry and Security (BIS) said they are open to the semiconductor industry's input for finding ways to keep sending AI chips to China for small and medium-sized systems.
The rules were designed to curtail China's ability to exploit American chips to build massive supercomputers that can be used to create technologies similar to OpenAI's ChatGPT and could also be used for military purposes, officials said.
Thomas Krueger, a former U.S. National Security Council export control official, said "the organizing principle for all these rules is to keep them focused on those capabilities that can enable Chinese military systems."
"They're not interested in going after broad consumer applications."
"They're really trying to thread that needle."
U.S. officials asked for input in devising a "tamperproof" way to keep systems that might contain up to 256 AI chips from being strung together into a supercomputer.
"This approach could constrain (controlled AI chips) from being used to train large dual-use AI foundation models with capabilities of concern, while allowing AI training capabilities at a small or medium scale," the BIS wrote.
Nvidia, Intel and AMD declined to comment.
Nvidia shares closed down 4.67% on Tuesday after the new rules were announced.
The other primary gift that U.S. officials gave Nvidia, Intel and AMD was hobbling their most capable Chinese competitors.
New rules will make it nearly impossible for Moore Threads and Biren, two well-funded Chinese startups founded by Nvidia veterans, to have their designs manufactured using cutting-edge chipmaking technology.
That means whatever Nvidia is able to sell to China will likely be Chinese buyers' best legal option.
"Our assumption is that (Nvidia) will quickly redesign a chip to meet new standards with relatively immaterial disruptions to the current business outlook," analysts at investment bank Piper Sandler wrote in a note to clients.
TOOL RULES TIGHTENED
As part of the new rules published on Tuesday that take effect in 30 days, U.S. officials targeted China's chip manufacturers by restricting the export of advanced chipmaking equipment known as immersion deep ultraviolet (DUV) lithography machines if they contain any American parts.
"What they're really doing is closing all the doors," TechInsights analyst Dan Hutcheson said, adding the new rules close off a substantial amount of potential future developments.
"They're basically trying to future-proof the document."
The DUV machines are not produced by any American toolmakers, but are made by Japan's Nikon and the Netherlands' ASML.
The DUV rules announced on Tuesday codified diplomatic work between the U.S., Japan and the Netherlands to institute similar controls on sending the machines to China, said Clete Willems, a trade and policy attorney with Akin Gump.
While immersion DUV machines cannot product cutting-edge chips, they can come close and are likely what was recently used by Huawei's chip manufacturing partners to create a new smartphone chip for its Mate 60 Pro, according to analysts.
"This control alone will constrain China’s ability to expand advanced node semiconductor manufacturing for many years," said Gregory Allen, a director at the Center for Strategic and International Studies.
"If spare parts and components for the equipment can be effectively controlled, the new regulations may degrade the advanced node manufacturing facilities that China currently has in operation."
Instead of the broad swaths of tools blocked by last year's export restrictions, officials on Tuesday narrowed them to target specific technologies and techniques found in the complex machines needed to build advanced transistor designs, according to David Kanter, President of Real World Insights.
By narrowing the equipment that is blocked, the rules allow the toolmakers to sell equipment that is made to build much older chips without fear of running afoul of the government restrictions.
Reporting by Stephen Nellis and Max A. Cherney in San Francisco; Editing by Kenneth Li and Jamie Freed
https://www.reuters.com/technology/us-t ... 023-10-18/
Re: CHINA
REUTERS
"Nvidia says U.S. speeded up new export curbs on AI chips"
Reuters
October 24, 2023
Oct 24 (Reuters) - Chip designer Nvidia said new U.S. export curbs on the sale of its high-end artificial intelligence chips to China came into effect on Monday as regulators advanced the deadline.
The restrictions were supposed to come into play 30 days from Oct. 17 when the Biden administration unveiled measures to stop countries, including China, Iran and Russia, from receiving advanced AI chips designed by Nvidia and others.
Nvidia does not expect a near-term impact on its earnings from the move, it disclosed in a filing on Tuesday, but did not say why the U.S. government had accelerated the timing.
Advanced Micro Devices, also impacted by the curbs, did not immediately respond to Reuters' requests for comment, while the U.S. Department of Commerce declined to comment.
Intel, which began selling its Gaudi 2 chips in China in July, said it was "reviewing the regulations and assessing the potential impact."
The restrictions bar exports of Nvidia's modified advanced AI chips A800 and H800 - both of which were created for the Chinese market to comply with previous export rules.
The Nvidia A100, H100 and L40S chips are also impacted by the curbs.
Reporting by Aditya Soni in Bengaluru; Editing by Arun Koyyur and Anil D'Silva
https://www.reuters.com/technology/nvid ... 023-10-24/
"Nvidia says U.S. speeded up new export curbs on AI chips"
Reuters
October 24, 2023
Oct 24 (Reuters) - Chip designer Nvidia said new U.S. export curbs on the sale of its high-end artificial intelligence chips to China came into effect on Monday as regulators advanced the deadline.
The restrictions were supposed to come into play 30 days from Oct. 17 when the Biden administration unveiled measures to stop countries, including China, Iran and Russia, from receiving advanced AI chips designed by Nvidia and others.
Nvidia does not expect a near-term impact on its earnings from the move, it disclosed in a filing on Tuesday, but did not say why the U.S. government had accelerated the timing.
Advanced Micro Devices, also impacted by the curbs, did not immediately respond to Reuters' requests for comment, while the U.S. Department of Commerce declined to comment.
Intel, which began selling its Gaudi 2 chips in China in July, said it was "reviewing the regulations and assessing the potential impact."
The restrictions bar exports of Nvidia's modified advanced AI chips A800 and H800 - both of which were created for the Chinese market to comply with previous export rules.
The Nvidia A100, H100 and L40S chips are also impacted by the curbs.
Reporting by Aditya Soni in Bengaluru; Editing by Arun Koyyur and Anil D'Silva
https://www.reuters.com/technology/nvid ... 023-10-24/
Re: CHINA
The New York Post
"Biden says US is willing to fight China on behalf of the Philippines following ship collision near disputed island"
Story by Steven Nelson
26 OCTOBER 2023
WASHINGTON — President Biden said Wednesday that the US military is willing to fight nuclear-armed China on behalf of the Philippines after ships from the two Asian countries collided near a disputed, unpopulated island in the South China Sea.
“The United States defense agreement with the Philippines is ironclad."
"Any attack on the Filipino aircraft, vessels or armed forces will invoke our mutual defense treaty with the Philippines,” Biden said during a joint press conference at the White House alongside Australian Prime Minister Anthony Albanese.
The 1951 mutual defense pact says the US and the Philippines will jointly “defend themselves against external armed attack.”
On Sunday, two of Manila’s military ships collided with a Chinese vessel that sought to block them from reaching the disputed Second Thomas Shoal, which is strategically located along important commercial shipping routes but also submerged at high tide.
The Second Thomas Shoal is located much closer to the Philippines than to China and is one of dozens of islands in the South China Sea disputed by China and the governments of nearby countries including Vietnam, Malaysia, Brunei and Taiwan.
Biden has generally taken a more conciliatory approach toward China and in the same Rose Garden remarks reminisced about past travels while vice president with Chinese President Xi Jinping.
He said he sought “competition” but that “I’m not looking for conflict” with China.
House Republicans launched an impeachment inquiry last month into the president’s role in his son Hunter and brother James Biden’s foreign business dealings, including a pair of ventures with Chinese government-linked companies that resulted in millions of dollars of income going to the Bidens.
Biden met with his relatives’ partners in both Chinese government-linked ventures and at one point was penciled in for a 10% cut in a venture that subsequently netted his son and brother about $6.1 million.
Republicans have faulted Biden for not doing more to press China to be transparent about the origins of COVID-19, which killed more than 1.1 million Americans after possibly leaking from a Wuhan lab, and for not more strongly condemning China’s fentanyl exports that are fueling record-high US drug overdose deaths.
https://www.msn.com/en-us/news/world/bi ... bc85&ei=31
"Biden says US is willing to fight China on behalf of the Philippines following ship collision near disputed island"
Story by Steven Nelson
26 OCTOBER 2023
WASHINGTON — President Biden said Wednesday that the US military is willing to fight nuclear-armed China on behalf of the Philippines after ships from the two Asian countries collided near a disputed, unpopulated island in the South China Sea.
“The United States defense agreement with the Philippines is ironclad."
"Any attack on the Filipino aircraft, vessels or armed forces will invoke our mutual defense treaty with the Philippines,” Biden said during a joint press conference at the White House alongside Australian Prime Minister Anthony Albanese.
The 1951 mutual defense pact says the US and the Philippines will jointly “defend themselves against external armed attack.”
On Sunday, two of Manila’s military ships collided with a Chinese vessel that sought to block them from reaching the disputed Second Thomas Shoal, which is strategically located along important commercial shipping routes but also submerged at high tide.
The Second Thomas Shoal is located much closer to the Philippines than to China and is one of dozens of islands in the South China Sea disputed by China and the governments of nearby countries including Vietnam, Malaysia, Brunei and Taiwan.
Biden has generally taken a more conciliatory approach toward China and in the same Rose Garden remarks reminisced about past travels while vice president with Chinese President Xi Jinping.
He said he sought “competition” but that “I’m not looking for conflict” with China.
House Republicans launched an impeachment inquiry last month into the president’s role in his son Hunter and brother James Biden’s foreign business dealings, including a pair of ventures with Chinese government-linked companies that resulted in millions of dollars of income going to the Bidens.
Biden met with his relatives’ partners in both Chinese government-linked ventures and at one point was penciled in for a 10% cut in a venture that subsequently netted his son and brother about $6.1 million.
Republicans have faulted Biden for not doing more to press China to be transparent about the origins of COVID-19, which killed more than 1.1 million Americans after possibly leaking from a Wuhan lab, and for not more strongly condemning China’s fentanyl exports that are fueling record-high US drug overdose deaths.
https://www.msn.com/en-us/news/world/bi ... bc85&ei=31
Re: CHINA
REUTERS
"Yellen says supply 'friend-shoring' to reduce dependence on China should be broad-based"
By Reuters Staff
OCTOBER 26, 2023
WASHINGTON, Oct 26 (Reuters) - The Biden administration wants to pursue a broad-based policy of “friend-shoring” of supply chains with many countries to avoid over-dependence on China, while preserving the benefits of trade and globalization, U.S. Treasury Secretary Janet Yellen said on Thursday.
Yellen also told a Bloomberg live event in Washington that the Treasury was holding “constructive and deepening” discussions with China on areas of mutual concern at the staff level, after two new U.S.-China working group meetings this week.
Reporting by David Lawder
https://www.reuters.com/article/usa-tre ... SW1N34P05I
"Yellen says supply 'friend-shoring' to reduce dependence on China should be broad-based"
By Reuters Staff
OCTOBER 26, 2023
WASHINGTON, Oct 26 (Reuters) - The Biden administration wants to pursue a broad-based policy of “friend-shoring” of supply chains with many countries to avoid over-dependence on China, while preserving the benefits of trade and globalization, U.S. Treasury Secretary Janet Yellen said on Thursday.
Yellen also told a Bloomberg live event in Washington that the Treasury was holding “constructive and deepening” discussions with China on areas of mutual concern at the staff level, after two new U.S.-China working group meetings this week.
Reporting by David Lawder
https://www.reuters.com/article/usa-tre ... SW1N34P05I
Re: CHINA
REUTERS
"US-China tensions will slow global chip industry, TSMC founder says"
By Krystal Hu
October 26, 2023
NEW YORK, Oct 26 (Reuters) - The founder of the world's biggest chipmaker, Morris Chang, said on Thursday that increasing tensions over technology between the United States and China will slow down the global chip industry.
Chang, who founded Taiwan Semiconductor Manufacturing Co in the late 1980s, made the remarks at an event hosted by the Asia Society in New York.
The company has helped the democratically governed island of Taiwan become the world's leading producer of advanced chips.
U.S. officials earlier this month enacted another set of export restrictions that clamped down on what chips and chipmaking tools can be exported to China after Huawei Technologies last month showed off a phone with a new domestically manufactured chip.
Chang, 92, said that cutting off China's chip industry from the rest of the world would affect other players beyond China.
"I think that decoupling will ultimately slow down everybody."
"Of course, the immediate purpose is to slow China down, and I think it's doing that," Chang said.
Chang said that the effects of such decoupling were already becoming clear and that many previous economic conflicts between established and emerging powers had ended in wars.
"It looks like counties are mad at each other, that worries me," said Chang, who characterizes the geopolitical tension between the U.S. and China as an existing power confronting an emerging power.
"Our only hope is it doesn't lead to anything even more serious," Chang said.
He also praised the higher education system in the U.S., adding his optimism about the country as TMSC invests to build chipmaking facilities in Arizona.
Born and raised in China, Chang built a career in the U.S., where he become a naturalized citizen in 1962, before being recruited to build the chip industry in Taiwan.
He is now regarded as a legendary figure in the industry that's caught in the middle of the geopolitical tension.
"I really think this country, which is my country, (the) United States, is still the hope of the world, that's in spite of all the problems we are having," said Chang.
Reporting by Krystal Hu; Writing by Stephen Nellis in San Francisco; Editing by Sandra Maler
https://www.reuters.com/technology/us-c ... 023-10-26/
"US-China tensions will slow global chip industry, TSMC founder says"
By Krystal Hu
October 26, 2023
NEW YORK, Oct 26 (Reuters) - The founder of the world's biggest chipmaker, Morris Chang, said on Thursday that increasing tensions over technology between the United States and China will slow down the global chip industry.
Chang, who founded Taiwan Semiconductor Manufacturing Co in the late 1980s, made the remarks at an event hosted by the Asia Society in New York.
The company has helped the democratically governed island of Taiwan become the world's leading producer of advanced chips.
U.S. officials earlier this month enacted another set of export restrictions that clamped down on what chips and chipmaking tools can be exported to China after Huawei Technologies last month showed off a phone with a new domestically manufactured chip.
Chang, 92, said that cutting off China's chip industry from the rest of the world would affect other players beyond China.
"I think that decoupling will ultimately slow down everybody."
"Of course, the immediate purpose is to slow China down, and I think it's doing that," Chang said.
Chang said that the effects of such decoupling were already becoming clear and that many previous economic conflicts between established and emerging powers had ended in wars.
"It looks like counties are mad at each other, that worries me," said Chang, who characterizes the geopolitical tension between the U.S. and China as an existing power confronting an emerging power.
"Our only hope is it doesn't lead to anything even more serious," Chang said.
He also praised the higher education system in the U.S., adding his optimism about the country as TMSC invests to build chipmaking facilities in Arizona.
Born and raised in China, Chang built a career in the U.S., where he become a naturalized citizen in 1962, before being recruited to build the chip industry in Taiwan.
He is now regarded as a legendary figure in the industry that's caught in the middle of the geopolitical tension.
"I really think this country, which is my country, (the) United States, is still the hope of the world, that's in spite of all the problems we are having," said Chang.
Reporting by Krystal Hu; Writing by Stephen Nellis in San Francisco; Editing by Sandra Maler
https://www.reuters.com/technology/us-c ... 023-10-26/
Re: CHINA
REUTERS
"China rushes to swap Western tech with domestic options as U.S. cracks down"
Reuters
October 26, 2023
Summary
* Beijing has increased spending on domestic tech since late 2022
* Telecoms and banks likely next to be pushed to use more Chinese products
* Replacing Western tech due to geopolitics and cyberattack fears
* Foreign firms still dominant in banking-related software
BEIJING, Oct 26 (Reuters) - China has stepped up spending to replace Western-made technology with domestic alternatives as Washington tightens curbs on high-tech exports to its rival, according to government tenders, research documents and four people familiar with the matter.
Reuters is reporting for the first time details of tenders from the government, military and state-linked entities, which show an acceleration in domestic substitution since last year.
China has spent heavily on replacing computer equipment, and the telecom and financial sectors are probably the next target, said two people familiar with the industries.
State-backed researchers also identified digital payments as particularly vulnerable to possible Western hacking, according to a review of their work, making a push to indigenize such technology likely.
The number of tenders from state-owned enterprises (SOEs), government and military bodies to nationalize equipment doubled to 235 from 119 in the 12 months after September 2022, according to a finance ministry database seen by Reuters.
In the same period, the value of awarded projects listed on the database totaled 156.9 million yuan, or more than triple the previous year.
While the database represents only a fraction of tender bids nationwide, it is the largest collection of state tenders publicly available and mirrors third-party data.
China spent 1.4 trillion yuan ($191 billion) replacing foreign hardware and software in 2022, marking a year-on-year increase of 16.2%, according to IT research firm First New Voice.
But Beijing's lack of advanced chip-manufacturing capabilities prevents it from completely substituting products with alternatives that are entirely locally made, analysts say.
Previous domestic substitution efforts stalled because China did not have the "technical chops to pull off localization until now, and to a certain extent they still kind of don't," said Kendra Schaefer, head of tech policy research at Beijing-based consultancy Trivium China.
FEAR OF DEPENDENCE
SOEs were instructed last year to replace office software systems with domestic products by 2027, the first time such specific deadlines were imposed, according to five brokerage firms that cited a September 2022 order from China's state asset regulator.
Reuters could not independently verify the order.
Domestic replacement projects this year have targeted markedly sensitive infrastructure, the tenders show.
One partially redacted tender for a "certain government department in Gansu province" assigned 4.4 million yuan to replace an intelligence-gathering system's equipment, without providing specifics.
People's Liberation Army units in the northeastern city of Harbin and Xiamen in the south last December meanwhile issued tenders to replace foreign-made computers.
Tech researchers such as Mo Jianlei of the Chinese Academy of Sciences, the country's largest state-run research organization, said the Chinese government was increasingly concerned about Western equipment being hacked by foreign powers.
The state asset regulator did not return a request for comment.
Over the past year, state-linked researchers also called on Beijing to strengthen anti-hacking defences in its financial infrastructure due to geopolitical concerns.
One March research paper highlighted the dependence of China's UnionPay credit card system on U.S software firm BMC for settlements.
"Beware of security vulnerabilities in hardware and software set by the U.S. side ... build a financial security 'firewall'," the researchers wrote.
BMC declined to comment.
An article published this year in the journal Cyberspace Security by researchers from the state-run China Telecommunications Corporation concluded the country was overdependent on chips made by U.S. giant Qualcomm for back-end management, as well as on the iOS and Android systems.
"(They) are all firmly controlled by American companies," the researchers wrote.
As China has not signed World Trade Organization clauses governing public procurement, the substitution effort does not appear to violate international accords, according to the U.S. Treasury.
The U.S. has implemented similar rules barring Chinese companies from public sector bids.
Qualcomm, Google and Apple did not immediately return requests for comment.
WINNERS AND LOSERS
China's effort to build an independent computing system dates back to at least its 2006 five-year plan for science and technology development, which listed the semiconductor and software systems sectors as national priorities.
This effort spawned state-owned companies that are increasingly winning major contracts.
Two firms awarded the Harbin tenders were subsidiaries of China Electronics Corporation and China Electronics Technology Group Corporation - both heavily targeted by U.S. sanctions.
The state regulator's 2022 order pushed SOEs away from U.S. companies such as Microsoft and Adobe, according to an employee of a Beijing-based firm that develops domestic office-processing software
China Tobacco, for example, in July began switching some subsidiaries from Microsoft Windows to Huawei's EulerOS, according to an employee of a software vendor that services the state-owned manufacturer.
The people spoke on condition of anonymity because they were not authorized to discuss clients and competitors.
For years, Western tech companies have shared their source code and entered into partnerships with domestic firms to address Beijing's concerns, but prominent computer scientists such as Ni Guangnan of the Chinese Academy of Engineering have said such measures are not sufficient for China's security needs.
China Tobacco, Microsoft and Adobe did not respond to requests for comment.
In September, Reuters and other outlets reported that some employees of central government agencies were banned from using iPhones at work.
"In certain sectors, customers ... are opting for domestic suppliers, with foreign suppliers frequently facing informal barriers," the European Union Chamber of Commerce in Beijing said in response to Reuters questions.
In a 2023 American Chamber of Commerce (AmCham) in Shanghai report, 89% of the organization's tech business members named procurement practices favoring domestic competitors as a regulatory obstacle.
It was the highest percentage of any sector.
AmCham Shanghai President Eric Zheng acknowledged China's national security concerns but said he hoped "normal procurement procedures will not be politicized so that US companies can compete fairly and pursue commercial opportunities ... to benefit both countries."
The U.S. Department of Commerce, China Electronics Corporation and China Electronics Technology Group Corporation did not return requests for comment.
HUAWEI PRIZED
Chinese tech conglomerate Huawei has emerged as the leading firm in this replacement cycle, according to three people familiar with China's enterprise tech industry, who spoke on condition of anonymity given the sensitivity of the issue.
In 2022, Huawei's enterprise business, which includes software and cloud computing operations, reported 133 billion yuan in sales, up 30% on the previous year.
One of the people said privately-held Huawei was seen as more nimble than state-owned groups in rolling out products and executing projects.
The other two sources highlighted Huawei's broad product suite - spanning chips to software - as an advantage.
Clients also prize Huawei for its ability to process data on internal company servers and external cloud networks, as well as its wide offering of cybersecurity products, according to the employee of a China Tobacco tech supplier.
Huawei declined to comment.
The replacement drive has re-drawn entire sub-sectors of the software industry.
The combined China market share held by five major foreign makers of database management systems – the majority of which are American - dropped from 57.3% in 2018 to 27.3% by the end of 2022, according to industry group IDC.
Despite heavy spending on domestic substitution, however, foreign firms are still dominant suppliers for banking and telecoms database management.
Non-Chinese companies held 90% of market share for banking database systems at the end of 2022, according to EqualOcean, a tech consultancy.
Financial institutions are generally reluctant to switch database systems despite government pressure, said one of the industry sources, adding that they have higher stability requirements than many other sectors and local players cannot yet match their needs.
Even for personal computers, banks that switch from an international brand to China's dominant supplier Lenovo would still be reliant on critical chip components provided by Western firms, one of the industry sources said.
Reporting by Beijing newsroom; Editing by Brenda Goh and Katerina Ang
https://www.reuters.com/technology/chin ... 023-10-26/
"China rushes to swap Western tech with domestic options as U.S. cracks down"
Reuters
October 26, 2023
Summary
* Beijing has increased spending on domestic tech since late 2022
* Telecoms and banks likely next to be pushed to use more Chinese products
* Replacing Western tech due to geopolitics and cyberattack fears
* Foreign firms still dominant in banking-related software
BEIJING, Oct 26 (Reuters) - China has stepped up spending to replace Western-made technology with domestic alternatives as Washington tightens curbs on high-tech exports to its rival, according to government tenders, research documents and four people familiar with the matter.
Reuters is reporting for the first time details of tenders from the government, military and state-linked entities, which show an acceleration in domestic substitution since last year.
China has spent heavily on replacing computer equipment, and the telecom and financial sectors are probably the next target, said two people familiar with the industries.
State-backed researchers also identified digital payments as particularly vulnerable to possible Western hacking, according to a review of their work, making a push to indigenize such technology likely.
The number of tenders from state-owned enterprises (SOEs), government and military bodies to nationalize equipment doubled to 235 from 119 in the 12 months after September 2022, according to a finance ministry database seen by Reuters.
In the same period, the value of awarded projects listed on the database totaled 156.9 million yuan, or more than triple the previous year.
While the database represents only a fraction of tender bids nationwide, it is the largest collection of state tenders publicly available and mirrors third-party data.
China spent 1.4 trillion yuan ($191 billion) replacing foreign hardware and software in 2022, marking a year-on-year increase of 16.2%, according to IT research firm First New Voice.
But Beijing's lack of advanced chip-manufacturing capabilities prevents it from completely substituting products with alternatives that are entirely locally made, analysts say.
Previous domestic substitution efforts stalled because China did not have the "technical chops to pull off localization until now, and to a certain extent they still kind of don't," said Kendra Schaefer, head of tech policy research at Beijing-based consultancy Trivium China.
FEAR OF DEPENDENCE
SOEs were instructed last year to replace office software systems with domestic products by 2027, the first time such specific deadlines were imposed, according to five brokerage firms that cited a September 2022 order from China's state asset regulator.
Reuters could not independently verify the order.
Domestic replacement projects this year have targeted markedly sensitive infrastructure, the tenders show.
One partially redacted tender for a "certain government department in Gansu province" assigned 4.4 million yuan to replace an intelligence-gathering system's equipment, without providing specifics.
People's Liberation Army units in the northeastern city of Harbin and Xiamen in the south last December meanwhile issued tenders to replace foreign-made computers.
Tech researchers such as Mo Jianlei of the Chinese Academy of Sciences, the country's largest state-run research organization, said the Chinese government was increasingly concerned about Western equipment being hacked by foreign powers.
The state asset regulator did not return a request for comment.
Over the past year, state-linked researchers also called on Beijing to strengthen anti-hacking defences in its financial infrastructure due to geopolitical concerns.
One March research paper highlighted the dependence of China's UnionPay credit card system on U.S software firm BMC for settlements.
"Beware of security vulnerabilities in hardware and software set by the U.S. side ... build a financial security 'firewall'," the researchers wrote.
BMC declined to comment.
An article published this year in the journal Cyberspace Security by researchers from the state-run China Telecommunications Corporation concluded the country was overdependent on chips made by U.S. giant Qualcomm for back-end management, as well as on the iOS and Android systems.
"(They) are all firmly controlled by American companies," the researchers wrote.
As China has not signed World Trade Organization clauses governing public procurement, the substitution effort does not appear to violate international accords, according to the U.S. Treasury.
The U.S. has implemented similar rules barring Chinese companies from public sector bids.
Qualcomm, Google and Apple did not immediately return requests for comment.
WINNERS AND LOSERS
China's effort to build an independent computing system dates back to at least its 2006 five-year plan for science and technology development, which listed the semiconductor and software systems sectors as national priorities.
This effort spawned state-owned companies that are increasingly winning major contracts.
Two firms awarded the Harbin tenders were subsidiaries of China Electronics Corporation and China Electronics Technology Group Corporation - both heavily targeted by U.S. sanctions.
The state regulator's 2022 order pushed SOEs away from U.S. companies such as Microsoft and Adobe, according to an employee of a Beijing-based firm that develops domestic office-processing software
China Tobacco, for example, in July began switching some subsidiaries from Microsoft Windows to Huawei's EulerOS, according to an employee of a software vendor that services the state-owned manufacturer.
The people spoke on condition of anonymity because they were not authorized to discuss clients and competitors.
For years, Western tech companies have shared their source code and entered into partnerships with domestic firms to address Beijing's concerns, but prominent computer scientists such as Ni Guangnan of the Chinese Academy of Engineering have said such measures are not sufficient for China's security needs.
China Tobacco, Microsoft and Adobe did not respond to requests for comment.
In September, Reuters and other outlets reported that some employees of central government agencies were banned from using iPhones at work.
"In certain sectors, customers ... are opting for domestic suppliers, with foreign suppliers frequently facing informal barriers," the European Union Chamber of Commerce in Beijing said in response to Reuters questions.
In a 2023 American Chamber of Commerce (AmCham) in Shanghai report, 89% of the organization's tech business members named procurement practices favoring domestic competitors as a regulatory obstacle.
It was the highest percentage of any sector.
AmCham Shanghai President Eric Zheng acknowledged China's national security concerns but said he hoped "normal procurement procedures will not be politicized so that US companies can compete fairly and pursue commercial opportunities ... to benefit both countries."
The U.S. Department of Commerce, China Electronics Corporation and China Electronics Technology Group Corporation did not return requests for comment.
HUAWEI PRIZED
Chinese tech conglomerate Huawei has emerged as the leading firm in this replacement cycle, according to three people familiar with China's enterprise tech industry, who spoke on condition of anonymity given the sensitivity of the issue.
In 2022, Huawei's enterprise business, which includes software and cloud computing operations, reported 133 billion yuan in sales, up 30% on the previous year.
One of the people said privately-held Huawei was seen as more nimble than state-owned groups in rolling out products and executing projects.
The other two sources highlighted Huawei's broad product suite - spanning chips to software - as an advantage.
Clients also prize Huawei for its ability to process data on internal company servers and external cloud networks, as well as its wide offering of cybersecurity products, according to the employee of a China Tobacco tech supplier.
Huawei declined to comment.
The replacement drive has re-drawn entire sub-sectors of the software industry.
The combined China market share held by five major foreign makers of database management systems – the majority of which are American - dropped from 57.3% in 2018 to 27.3% by the end of 2022, according to industry group IDC.
Despite heavy spending on domestic substitution, however, foreign firms are still dominant suppliers for banking and telecoms database management.
Non-Chinese companies held 90% of market share for banking database systems at the end of 2022, according to EqualOcean, a tech consultancy.
Financial institutions are generally reluctant to switch database systems despite government pressure, said one of the industry sources, adding that they have higher stability requirements than many other sectors and local players cannot yet match their needs.
Even for personal computers, banks that switch from an international brand to China's dominant supplier Lenovo would still be reliant on critical chip components provided by Western firms, one of the industry sources said.
Reporting by Beijing newsroom; Editing by Brenda Goh and Katerina Ang
https://www.reuters.com/technology/chin ... 023-10-26/
Re: CHINA
REUTERS
"Nvidia shares drop after report of canceled China orders"
By Chibuike Oguh
October 31, 2023
NEW YORK, Oct 31 (Reuters) - Shares of Nvidia Corp dropped by about 5% to a near five-month low on Tuesday following a Wall Street Journal report that the artificial intelligence (AI) giant may be forced to cancel up to $5 billion worth of advanced chip orders to China in compliance with new U.S. government restrictions.
Nvidia was notified last week that AI chip orders scheduled for delivery next year to major Chinese technology companies, including Alibaba Group, TikTok owner-ByteDance and Baidu, are subject to the latest export restrictions announced by the U.S. Commerce Department, the Wall Street Journal reported, citing people familiar with the matter.
Nvidia's stock fell to as low as $392.30, down 4.7%, to the lowest level since mid-June.
The stock, which has been one of the major drivers of this year's 22% gain in the Nasdaq index, is now down nearly 20% from its record high close of $493.55 reached on Aug. 31. It was last down 2.09%.
"The stock is getting oversold," said Tom Plumb, chief executive and lead portfolio manager at Plumb Funds, which has Nvidia as one of its largest holdings.
"Previously, Nvidia has said this is not going to have a short-term impact but it's more in the long term."
"We still expect a pretty strong quarter and think it's a great long-term holding, although we are not adding any new positions because of the volatility," Plumb added.
A Nvidia spokesperson said there is "high demand" for its advanced chips, which often require significant lead time to build, and that it is working to allocate orders to its "wide range of customers" in the United States and elsewhere.
"These new export controls will not have a meaningful impact in the near term," the Nvidia spokesperson said in a statement.
Earlier this month, the Biden administration imposed export restrictions on shipments of more AI chips designed by Nvidia and others to China, a move designed to stop Beijing from receiving cutting-edge U.S. technologies to strengthen its military.
The new rules go into effect in November and included export controls to countries including Iran and Russia.
"I think Nvidia is priced for perfection and any trip off can have major impact when you have a stock that is trading at 20 times sales and 40 times earnings," said Thomas Hayes, chairman at Great Hill Capital in New York.
Reporting by Chibuike Oguh in New York; additional reporting by Stephen Nellis in San Francisco and Amruta Khandekar in Bengaluru; Editing by Lance Tupper, Michelle Price, Jonathan Oatis and Deepa Babington
https://www.reuters.com/technology/nvid ... 023-10-31/
"Nvidia shares drop after report of canceled China orders"
By Chibuike Oguh
October 31, 2023
NEW YORK, Oct 31 (Reuters) - Shares of Nvidia Corp dropped by about 5% to a near five-month low on Tuesday following a Wall Street Journal report that the artificial intelligence (AI) giant may be forced to cancel up to $5 billion worth of advanced chip orders to China in compliance with new U.S. government restrictions.
Nvidia was notified last week that AI chip orders scheduled for delivery next year to major Chinese technology companies, including Alibaba Group, TikTok owner-ByteDance and Baidu, are subject to the latest export restrictions announced by the U.S. Commerce Department, the Wall Street Journal reported, citing people familiar with the matter.
Nvidia's stock fell to as low as $392.30, down 4.7%, to the lowest level since mid-June.
The stock, which has been one of the major drivers of this year's 22% gain in the Nasdaq index, is now down nearly 20% from its record high close of $493.55 reached on Aug. 31. It was last down 2.09%.
"The stock is getting oversold," said Tom Plumb, chief executive and lead portfolio manager at Plumb Funds, which has Nvidia as one of its largest holdings.
"Previously, Nvidia has said this is not going to have a short-term impact but it's more in the long term."
"We still expect a pretty strong quarter and think it's a great long-term holding, although we are not adding any new positions because of the volatility," Plumb added.
A Nvidia spokesperson said there is "high demand" for its advanced chips, which often require significant lead time to build, and that it is working to allocate orders to its "wide range of customers" in the United States and elsewhere.
"These new export controls will not have a meaningful impact in the near term," the Nvidia spokesperson said in a statement.
Earlier this month, the Biden administration imposed export restrictions on shipments of more AI chips designed by Nvidia and others to China, a move designed to stop Beijing from receiving cutting-edge U.S. technologies to strengthen its military.
The new rules go into effect in November and included export controls to countries including Iran and Russia.
"I think Nvidia is priced for perfection and any trip off can have major impact when you have a stock that is trading at 20 times sales and 40 times earnings," said Thomas Hayes, chairman at Great Hill Capital in New York.
Reporting by Chibuike Oguh in New York; additional reporting by Stephen Nellis in San Francisco and Amruta Khandekar in Bengaluru; Editing by Lance Tupper, Michelle Price, Jonathan Oatis and Deepa Babington
https://www.reuters.com/technology/nvid ... 023-10-31/