Trending Now
We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
{{ subpage.title }}
A Microsoft logo is pictured on a store in the Manhattan borough of New York City, New York.
Microsoft gets OK to send chips to the UAE
The Biden administration, which reportedly brokered the deal earlier this year, did so to box out the Chinese government, which has sought to expand its influence with the Persian Gulf’s technology sector. In exchange, G42 has been working to assure US authorities that it can be trusted, despite ties to China.
In greenlighting the latest export, which has not yet been formally announced by the US Commerce Department, the administration will place extensive prohibitions on who can access Microsoft’s facility in the UAE, including China, its officials, and any sanctioned individuals. It’s not yet clear which company’s chips Microsoft will be exporting.
Biden tightens China’s access to chips one last time
Throughout Joe Biden’s presidency, the Commerce Department has gradually tightened its chokehold on China’s access to semiconductors needed to access, train, and build artificial intelligence. On Dec. 2, Commerce Secretary Gina Raimondo announced what she told reporters amounted to the “strongest controls ever” meant to restrict China’s access to AI for military applications. Today, China responded with its own new restrictions, sending a strong signal to the incoming US president.
The new US controls announced Monday, the third order in as many years, apply to 24 types of semiconductor manufacturing equipment, three types of software tools, and high-bandwidth memory, or HBM, an interface often used in producing AI chips. The department also added 140 Chinese companies to its Entity List, which requires regulatory approval should a US company wish to sell to a member of the list. “By adding key semiconductor fabrication facilities, equipment manufacturers, and investment companies to the Entity List, we are directly impeding the PRC’s military modernization, WMD programs, and ability to repress human rights,” said Matthew Axelrod, assistant secretary for export enforcement at the Commerce Department.
In response, on Dec. 3, China banned shipments of certain materials using gallium, germanium, and antimony to the US, as well as super-hard materials such as diamonds. These items can be used both for military and semiconductor applications. “China firmly opposes the US overstretching the concept of national security, abuse of export control measures, and illegal unilateral sanctions and long-arm jurisdiction against Chinese companies,” said Lin Jian, a Chinese Foreign Ministry spokesperson.
Jacob Feldgoise, an analyst at Georgetown University’s Center for Security and Emerging Technology, said the new US order plugged holes in the previous year’s rules. It requires a license for many more exported tools, focuses on high-bandwidth memory “because HBM is used by nearly all of the most capable AI chips” and strengthens the US’s grasp beyond its borders. “Notably, this set of controls is newly extraterritorial: It will impose licensing requirements on certain foreign-produced tools so long as they contain US technology,” Feldgoise said.
Xiaomeng Lu, director of Eurasia Group's geo-technology practice, noted that the US excluded the Chinese semiconductor company ChangXin Memory Technologies from the Entity List to appease the Japanese government. CXMT has been buying materials from Japanese suppliers to make its memory chips. “With the Trump administration on its way, they are expected to take a more unilateral approach and will be less likely to make concessions per requests of allies,” she said.
Jeremy Mark, a nonresident senior fellow at the Atlantic Council's GeoEconomics Center, said it’s difficult to judge how significant these new rules are because of the looming change of guard in the White House. Had they come ahead of the transition to a Kamala Harris administration, “they would continue making life complicated for Chinese semiconductor companies and US companies that rely on the China market for a significant portion of their sales.” However, Mark said that Donald Trump could strengthen or weaken export controls when he takes office, so it’s “impossible to say” what the legacy of this final move will be.
For Biden, it marks the end of an era of success: While his restrictions on China could have been tighter or less porous, he leaves office with China still searching for AI breakthroughs. The US, at least under Biden’s watch, is still on top.
But China’s next-day retaliation shows that it is ready to play hardball ahead of the incoming Trump administration. Beijing understands that diplomacy alone might not do the trick, and that to succeed in getting America to the bargaining table it needs to safeguard its own crucial resources. “This is a step up in China’s reaction to US technology sanctions,” Lu said. “China is very frustrated with the lack of communication channels with the incoming administration. They are trying to send a shot across the bow to get attention from the Trump team.”
The logo of Huawei's global flagship store is displayed in the Huangpu district of Shanghai, China.
The US is thwarting Huawei’s chip ambitions
The US government under President Joe Biden has imposed significant export controls not only on US-made chips but also on semiconductor manufacturing equipment necessary for Huawei to mass produce its own chip designs. US rules have largely cut Huawei off from the most powerful machines made by Dutch lithography company ASML, which essentially makes stencils to imprint miniature designs on chips for mass manufacturing, and TSMC, the world’s largest contract chipmaker. (The US Commerce Department is investigating how Huawei chips recently ended up on TSMC assembly lines.) Instead, Huawei relies on the Chinese chip manufacturer SMIC, which uses less powerful models of ASML machines.
But despite Huawei’s ambitions, Reuters reports that the company has been struggling with these restrictions to make effective chips at scale. For the Ascend 910C, the yield rate — the percentage that comes off manufacturing lines fully functional — is reportedly only 20%, while experts say a 70% yield rate is needed to be commercially viable. China’s top chip designer will need to make a breakthrough with limited resources to make good on its public promises to compete with Nvidia.Recently launched Amazon artificial intelligence processors that aim to tackle Nvidia and the chips made by the other hyperscalers such as Microsoft and Google are shown at an Amazon lab in Austin, Texas, in July 2024.
Amazon’s grand chip plans
Amazon is working on the third generation of its AI chips, called the Trainium2, which industry insiders told Bloomberg was a “make-or-break moment” for the company’s chip ambitions.
Luckily, they already have one important customer’s buy-in: Anthropic, which makes the chatbot Claude. On Nov. 22, Amazon announced it’s investing another $4 billion into Anthropic, doubling its total investment to $8 billion. As part of the deal, the Claude maker — perhaps the main rival to OpenAI — will continue to use Amazon’s Trainium series of chips. Amazon makes and invests in AI software and has the cloud infrastructure needed for AI – so if it can conquer the chip industry and produce chips comparable to the top models from Nvidia, it could become a dominant player in artificial intelligence.Hard Numbers: Doctor vs. machine, Pony rides to an IPO, Hot chips, Foxconn’s crazy demand
4.5 billion: A Chinese self-driving car company, called Pony AI, is attempting to go public on the Nasdaq stock exchange. The company, which is backed by the Japanese automaker Toyota among others, is seeking a $4.5 billion valuation for its initial public offering. The company previously tried to go public in the US through a blank-check company, but plans fell apart when China cracked down on such deals.
72: Nvidia's new Blackwell AI chips are reportedly overheating when installed in server racks designed to hold 72 chips. The company has already faced delays due to design flaws with these chips and is now asking suppliers to modify the designs of the racks numerous times. This issue could further delay sales to the largest tech companies in the world, such as Google and Meta.
A microchip and the Taiwanese flag in an illustration.
TSMC set to get its CHIPS money
The award marked the first finalized disbursement of the CHIPS Act since it was passed in 2022 and will go toward building TSMC's three new chip factories in Arizona — helping offset the $65 billion cost.
A total of $36 billion has been approved by Congress and directed by the Commerce Department to foreign companies such as TSMC and Samsung, as well as US companies including Intel and Texas Instruments. The delays, in addition to the normal snail’s pace of bureaucracy, stem from the fact that the Commerce Department spent much of the past two years negotiating with semiconductor companies, procuring specific commitments before finalizing the amounts they’d receive.
President Joe Biden needs to disburse the payments quickly because the future of the CHIPS Act is in question. When Donald Trump takes office in January, he may fulfill campaign promises to dismantle the Biden initiative or ask the Republican-controlled Congress to repeal it. Alternatively, the president-elect could carry on with the disbursements, which could further a bipartisan goal of beating back China’s AI ambitions.
Flags of Taiwan and the US.
The US tells TSMC to cut off China
The US Department of Commerce ordered Taiwan Semiconductor Manufacturing Company to stop shipping advanced chips to Chinese customers starting yesterday, Monday, Nov. 11. The government sent a letter to TSMC specifying that this restriction applies to all chips that are seven nanometers or smaller, which can be used to power artificial intelligence models.
Just weeks ago, TSMC notified the Commerce Department that it found that chips it produced were used inside of a Huawei processor. Huawei is a Chinese tech giant subject to stringent US trade restrictions. In response, TSMC cut off Sophgo, a Chinese chip designer that used its fabrication facilities to make the Huawei chip in question.
In Oct. 2022, the Biden administration announced stringent export controls against chips flowing into China. But there wasn’t an all-out ban, explains Xiaomeng Lu, director of Eurasia Group’s geo-technology practice. “US suppliers could seek a sales license to sell to Chinese buyers and sometimes they do get approved — this is the nature of [the] export control regime,” she said. “They are not blank bans.”
But now, TSMC, a strategic corporate partner of the US government, will be barred from all Chinese sales under the new export control rules. “It is possible that TSMC has sought these licenses and offered green lights [to bypass the rules],” Lu said. “Conversely, they have failed to comply with US rules and were caught doing so.”
Middlemen help US chips into China and Russia
Joe Biden’s administration has been aggressively enacting export controls on China and economic sanctions on Russia, preventing US companies from selling powerful chips and semiconductor manufacturing equipment to both nations. But now attention is turning to middlemen enabling the flow of AI-grade chips into the countries.
A Mumbai pharmaceutical company reportedly sold more than 1,000 Dell servers containing Nvidia H100 processors to Russian companies between April and August of 2024, according to a Bloomberg analysis of international trade data. India isn’t held to US sanctions, so it’s not clear what recourse the US would have — except if Dell or Nvidia are knowingly selling to middlemen to get their chips into Russia.
Elsewhere in the world, Taiwan Semiconductor Manufacturing Company, the largest contract chipmaker in the world, suspended shipments to a Chinese chip designer Sophgo last week when it discovered its chips inside a Huawei processor. Huawei, China’s most important chip company, is subject to stringent US export controls, an attempt to keep Chinese industry and military at bay. As GZERO AI wrote last week, the US Commerce Department is investigating whether TSMC, a strategic commercial and geopolitical partner for the US that has received billions to build facilities in America, knowingly evaded US export controls to sell to Huawei.
Gina Raimondo, the US Commerce Secretary, recently said she’s under “no illusion” that export controls on US-made chips from Nvidia, AMD, and other semiconductor companies are perfect. But these reports underscore that sanction controls are a moving target — and a game of whack-a-mole both for companies seeking compliance and regulators seeking enforcement.