Since last year, the US government has been trying hard and taking different measures to isolate China in the development of AI technology. The first event took place in April 2022, when the US urged the Dutch and Japanese governments to stop selling lithography machinery to China. In the following months, it expanded the ban and put restrictions on chip making companies from exporting high performing GPUs to China.

The restrictions put chip making companies under huge pressure as they lost one of the biggest chip markets in the world, which imports about 53.7% of the world’s supply of chips worth around $240 billion.  

Regardless of the restrictions imposed by the U.S, domestic companies are finding ways to export AI chips to China. Following in the footsteps of Nvidia and Intel, AMD is also exploring opportunities to sell its chips in the Chinese market.

Lisa Su, CEO of AMD, said on an earnings call late Tuesday that China is an “important” market and that the semiconductor giant wants to be fully compliant with U.S. export controls.

“Our plan is to, of course, be fully compliant with the U.S. export controls, but we do believe there’s an opportunity to develop a product for our customer set in China that is looking for AI solutions, and we’ll continue to work in that direction,” she added. 

Going the Nvidia Way? 

These chip companies are trying to circumvent the system from being very specific to details provided by the government. 

For instance, the banning rules explicitly forbid the sale of advanced chips to Chinese customers if they possess both high performance (minimum 300 trillion operations per second, or 300 teraops) and fast interconnect speed (typically, at least 600 gigabytes per second). 

An example of such a chip is Nvidia’s A100, which exceeds 600 teraops in performance and matches the required 600 Gb/s interconnect speed. During the earnings call AMD CEO Lisa Su said AMD is set to ramp up production of its flagship MI300 artificial-intelligence chips in the fourth quarter. The accelerator chips, which are in short supply, are designed to compete against the advanced H100 chips already sold by Nvidia.

In response to the export regulations, Nvidia introduced a modified version of its A100 chip, known as the A800, to ensure legal export to China in November last year. In March 2023 , the company announced another China-export version, the H800 chip, tweaked version of H100 chip which Chinese tech giants like Alibaba Group Holding Ltd, Baidu Inc, and Tencent Holdings Ltd are already utilizing in their cloud computing units.

In July this year, Intel entered the scene by introducing the Gaudi2 HL-225B, a chip explicitly tailored for the Chinese market. To adhere to US trade restrictions, Intel reduced the interconnect bandwidth by approximately 17 percent. 

Currently, AMD’s MI300s exceed the performance limits set by the export controls enforced in October last year, which prohibits the sale of specific advanced chips to China. Unlike Nvidia and Intel, AMD has not yet designed customized chips for the lucrative Chinese market. It needs to be seen if AMD will follow the suit and design chips particularly for China. 

Why Chip Makers are Obsessed with China 

Last month, CEOs of Intel Corp., Qualcomm Inc., and Nvidia Corp. lobbied against the extension of restrictions on selling certain chips and semiconductor manufacturing equipment to China. The Biden administration is expected to introduce these restrictions in the coming weeks.

As per the Bloomberg report, China stands as the world’s largest commercial market for commodity semiconductors, accounting for approximately one-fifth of Nvidia’s global revenue. The remarkable 220% surge in Nvidia’s stock price this year, is attributed to the soaring demand for high-end chips utilized in artificial intelligence systems and the optimistic outlook for sustained access to the lucrative Chinese market. 

Moreover, around 60% of Qualcomm’s revenue originates from providing components to China, which serves as the manufacturing hub for most of the world’s consumer electronics.

China, including Hong Kong, contributed $5.2 billion to AMD’s revenue in 2022. This region represents a substantial portion of the company’s business. China contributes around 30-40% AMD’s total revenue in 2022. However, recent geopolitical tensions and political conflicts between the US and China could potentially impact these figures in the future. 

While the U.S. officials are concerned about AI’s potential impact on national security as AI-powered weapons could benefit adversaries, and AI tools could be misused to create dangerous substances or harmful computer code.  

On the other hand chipmakers worry about their bottomline being China is a huge market for them. The  restrictions by the U.S government comes at a crucial time for GPU makers as the industry is experiencing a GPU crisis. 

Amid the global GPU shortage, all eyes are on Nvidia, the leading supplier of GPUs in the market. Also Nvidia founder and CEO Jensen Huang recently warned that China will cultivate its own chip companies in response to tensions with the U.S. and that existing chip players will have to work hard to stay competitive.