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US Secretary of Commerce Gina Raimondo announces a major grant at the Samsung semiconductor plant in Taylor, Texas, on Monday, April 15, 2024.
Samsung hands Biden another chip win
The Biden administration is busy courting global semiconductor manufacturers to build stateside, recently handing billions to Taiwan Semiconductor Manufacturing Company to expand its chip fabrication plant in Phoenix, Arizona.
On Monday, Commerce Secretary Gina Raimondo announced that the Biden administration is giving out another award as part of its CHIPS Act budget — this time to TSMC competitor Samsung, the South Korean electronics giant. Samsung will receive $6.4 billion to put toward its new manufacturing hub in Taylor, Texas, and expand its existing plant in Austin. In return, Samsung will pour $45 billion into its US projects and commit to producing cutting-edge two-nanometer chips.
Biden has made so-called silicon nationalism a tenet of his economic and national security-focused public policy, desperate to control the slow but crucial supply of chips used for everyday technologies as well as new artificial intelligence applications.
Google's Gemini home page displayed on a smartphone in a photo illustration.
Hard Numbers: Pay for Google?, Indonesian investment, Amazon walks out on AI, Scraping YouTube
175 billion: Google said it made $175 billion in revenue from its search engine and related advertising last year, but is it ready to risk the golden goose? The company is reportedly considering charging for premium features on its search engine, including AI-assisted search (its traditional search engine would remain free). We’ve previously tested Perplexity, one of the companies trying to uproot Google’s search dominance with artificial intelligence, and you can read our review here.
200 million: The chipmaker Nvidia is teaming up with Indonesian telecom company Indosat to build a $200 million data center for artificial intelligence in the city of Surakarta, according to Indonesia’s communications minister. This news comes weeks after AI played a central role in the country’s presidential election, and it represents a major investment from one of the world’s richest tech companies in a key emerging market as Indonesia seeks to modernize its economy.
1,000: Amazon’s Just Walk Out in-store AI system for cashier-less grocery store checkout relied heavily on more than 1,000 contractors in India manually checking that the checkout transactions were accurate. Now, Amazon has announced it’s ditching the technology, which was being used in 60 Amazon-branded grocery stores and two Whole Foods stores.
1 million: One OpenAI team reportedly transcribed more than 1 million hours of YouTube videos to train its GPT-4 large language model. The company built a speech recognition tool called Whisper to handle the massive load, a move that may have violated YouTube's terms of use. YouTube parent company Google is a major rival to OpenAI in developing generative AI. Google hasn’t filed suit yet, but legal action could eventually come.Sam Altman’s wish on a $7 trillion star
Sam Altman, CEO of OpenAI, needs more chips. He needs a lot more chips. The only thing stopping his $100 billion startup — if you can still call it a startup — may be the current supply of powerful chips.
The semiconductor fabrication process is notoriously slow and expensive, and the global supply chain runs through a few big, highly specialized firms. There are only a small number of companies that actually design chips made for generative AI — AMD, Intel, and Nvidia. And they’re pricy: Nvidia, which is set to take 85% of the market next year by one estimate, sells its H100 chips for about $40,000 a pop.
Naturally, Altman wants to make his own chips, but to make that dream a reality, he’s asking for an obscene amount of money.
How much does Altman want to raise?: According to the Wall Street Journal, Altman is deep in talks with investors with the goal of raising $5-7 trillion for a new chip venture.
“The dollar amount he’s reportedly trying to raise — $7 trillion — eclipses not just the semiconductor investments made by governments, including the United States’ $39 billion investment in chip manufacturing, but also the size of the entire semiconductor industry,” says Hanna Dohmen, a research analyst at Georgetown University's Center for Security and Emerging Technology. “It cannot be overstated how massive this sum of money is.”
Eurasia Group’s Director of Geotechnology Alexis Serfaty calls the sum “preposterously high and also seemingly arbitrary,” and says while it helps that OpenAI would be a built-in customer for this new chipmaker, the semiconductor industry is a difficult one with a propensity for demand gluts and supply chokepoints at every turn. Also, it would require strong leadership. “There are only so many people in the world with the expertise and experience to run an advanced fab, let alone the 300 [facilities] that $7 trillion would buy,” he adds.
Money can buy a lot — but it might not be able to solve the problems that every chipmaker already faces.
Who’s going to give him all that money? Altman has reportedly met with Masayoshi Son, CEO of the influential Japanese investment company SoftBank, and officials from Taiwan Semiconductor Manufacturing Company, one of the world’s largest chip fabrication companies, about investing in his new venture. Altman reportedly wants to “raise the money from Middle East investors and have TSMC build and run” new chip fabrication plants.
But the real eyebrow-raising potential investor isn’t in East Asia; it’s in the Middle East. In recent weeks, Altman has reportedly met with Sheikh Tahnoun bin Zayed al Nahyan, the United Arab Emirates’ security chief, to discuss the venture. OpenAI already struck a deal in October with the Emirati technology company, G42, to bring AI solutions to the Middle Eastern market, laying the foundation for additional business support from the wealthy nation.
This is going to cause geopolitical headaches, right? Almost definitely. Washington is extremely touchy about foreign investment in US companies and even more hesitant when it comes to scarce critical infrastructure such as semiconductors.
“While the US government is eager to bring chip manufacturing to the United States, it would likely be reluctant to do so with the involvement of the UAE government given existing concerns about Emirati companies’ relations with Chinese counterparts,” says Dohmen, who notes that, under US law, companies need licenses to even export certain semiconductors to the UAE.
America’s number one concern is China. Not only has the Biden administration invested heavily in the US chip industry, but it has launched a no-holds-barred campaign to prevent China from getting its hands on chips or even cloud-based AI. Over the past few years, the Biden administration has exacted stringent export controls that seek to prevent any global semiconductor technology, if it’s made with US parts, to do business with China, who it fears will use AI to supercharge its military. Dohmen adds that lawmakers are worried that G42 is already “dealing with blacklisted Chinese firms.”
Simply put, Serfaty says, “Altman’s partnerships with foreign governments could conflict with this US national security strategy.”
Could the US take action against this new venture? Yes. The US government has taken the extraordinary step to block foreign investment in chip companies. In 2018, the Trump administration blocked the sale of the US-based Qualcomm to the then-Singapore-based Broadcom, citing national security concerns. (Broadcom has since moved its headquarters to the US). That administration also blocked the sale of Lattice Semiconductor to a US private equity firm funded by Chinese capital.
Altman could be inviting antitrust scrutiny, as well. If he controls both the country’s most important generative AI company and the chip supply chain it relies upon, he’ll raise eyebrows with any antitrust regime — even if it’s not the current tech-hungry one overseen by the FTC’s Lina Khan and the DOJ’s Jonathan Kanter. The government is already starting to look into Microsoft’s $13 billion investment in OpenAI.
In short, all eyes are on OpenAI. The ChatGPT maker and its once-embattled, now-emboldened chief have their sights set on global AI domination. Whether it’s $7 trillion or far less, they’re due to make a real attempt to solve the chip problem that appears to stand in the way of true unbridled success.
The Google AI logo is being displayed on a smartphone with Gemini in the background.
Hard Numbers: Bye-bye Bard, Arm’s up, Robots took my job, Super Bowl ad blitz
60: The British chip designer Arm Holdings is experiencing a market surge. The company’s stock saw a 60% increase after positive financial results and a rosy outlook. The company, which licenses its chip designs, attributes increased demand to the AI boom.
4,600: Artificial intelligence has already led to 4,600 layoffs in the US, according to the firm Challenger, Gray & Christmas. And that’s a conservative estimate. Unlike with robotics breakthroughs of yore, this wave of artificial intelligence seems laser-focused on displacing white-collar workers.
7 million: AI made its way into some of this year’s Super Bowl ads — 30-second commercials that sold for about $7 million. Etsy debuted its AI shopping assistant, Microsoft boasted its Copilot AI business tool, and Google highlighted how its Pixel 8 phone uses the technology to help blind people take photos.--FILE--A chip of Huawei is seen in Ji'nan city, east China's Shandong province, 20 April 2018.
China’s powered-up chips
Two Chinese firms are readying production of new 5-nanometer semiconductors, according to The Financial Times, putting China one step closer to technological parity with the US. SMIC will mass-produce the high-powered chips, designed by Huawei, in Shanghai, which can be used to power next-generation smartphones.
The report says that if the smartphone chip line runs smoothly, SMIC will turn next to making Huawei’s Ascend 920 graphics chips, which the Chinese chip designer hopes will rival high-end NVIDIA’s H100 chips.
The Biden administration has taken extensive steps to curb the influx of chips and chip-manufacturing technology into China. The US is especially concerned about China using AI to boost its military capabilities, which require the highest-powered chips, such as those built by AMD and NVIDIA.
That said, Xiaomeng Lu, Eurasia Group’s director for geo-technology, compared the 5nm chips to Huawei’s demonstration of a 5G phone last year.
“It shows signs of China making progress – and they will catch up in the long term – but in the grand scheme of things this is an incremental, not a groundbreaking step,” she said.
Semiconductor chips are seen on a circuit board of a computer in this illustration picture taken February 25, 2022.
The great chip divide
The chip industry is surging on the back of insatiable demand for artificial intelligence. While AMD and NVIDIA have doubled and tripled their stock prices respectively in a single year, there’s reason to believe that AI’s rising tide isn’t lifting all ships.
Semiconductor industry analysts told the Financial Times that the chip boom is mostly focused on AMD and NVIDIA, which make high-powered graphics chips needed to run generative AI systems. That includes the companies’ suppliers, such as the chip fabrication company Taiwan Semiconductor, aka TSMC, and the server company Supermicro.
Meanwhile, Intel and Texas Instruments reported disappointing quarterly financial earnings last week, causing most of the sector’s stocks to droop. The culprit: weakened demand outside of AI. Not only was 2023 a down year for computers and smartphones, but there are new concerns about a pullback from automakers and industrial manufacturers.
It’s a far cry from just a few short years ago at the height of the pandemic when chip supply couldn’t catch up to ravenous demand, which made new cars and Nintendo Switches hard to come by.
But it may not be all smooth sailing for AMD and NVIDIA either: New reports indicate Amazon, Google, and Meta — who rely on AMD and NVIDIA chips to power their own AI chips — are investing billions to build their own. It’s not that there’s a chip shortage, really, but there’s a shortage of the right chips.Sam Altman, CEO of OpenAI, attends the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, on Jan. 18, 2024.
Sam Altman’s chip ambitions
The chipmaking process is notoriously difficult and expensive. AI developers like OpenAI depend on powerful chips from firms like NVIDIA and AMD. Fabrication often runs through Taiwan Semiconductor or the Korean-based Samsung, the two biggest companies by market share.
With this new venture, known by the code name Tigris, Altman wants to add another major player in the chipmaking process, which has been prone to bottlenecking in recent years. The global supply chain crisis coincided with a global chip shortage, leading to low supplies of appliances, computers, cars, and video game systems. Altman is in talks to raise funds from global players including Japan’s SoftBank and the UAE’s G42, promising to make its network of fabs global in scope.
For generative AI developers, they need the most powerful chips on the market — and they need as many as they can get.
Semiconductor chips are seen on a printed circuit board in this picture.
Graphene: Could it reduce chip-making costs?
What if the stuff found in pencils could be used to make computer chips? That’s a real possibility, according to new research published in the journal Nature.
Research scientists from Georgia Institute of Technology and China’s Tianjin University found that graphene, the material commonly found in modern pencils, can act as a semiconductor. For years, it was believed that graphene only behaved as a semimetal, not a semiconductor, but researchers have now discovered graphene’s “band gap.”
This breakthrough is notable amid the race to find cheaper and more available alternatives to silicon for the semiconductor technology that powers chips. Chips are notoriously expensive to make, but they’ve never been more important to modern life. Not only are chips necessary for manufacturing cars, appliances, and video game consoles — all of which were affected in the recent chip shortage spurred by the pandemic — but the availability of chips, particularly high-powered graphics chips, is a determining factor in what firms and global powers will enable an artificial intelligence revolution.
Using graphene without wasting scarce materials, however, will require a new production process, so mass-producing chips with graphene could take another “five years to a decade or more,” according to The Wall Street Journal.