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 }}
The NVIDIA logo seen at the American GPU manufacturer NVIDIA Taipei office.
Nvidia forges deals in American Southwest and Southeastern Asia
The California-based chip giant is negotiating with Taiwan Semiconductor Manufacturing Company, or TSMC, the world’s top contract chipmaker, to manufacture its top-of-the-line Blackwell AI processors at TSMC’s Arizona facility. TSMC has invested billions to bring its high-tech manufacturing to the Southwest US, thanks in part to a $6.6 billion cash infusion from the Biden administration as part of the CHIPS and Science Act. Apple and AMD have reportedly already signed on to get their chips made in the Arizona plant when it starts production in the first half of 2025. That said, the chips won’t be entirely made in America: Final packaging is done back in Taiwan, which complicates and prolongs an already lengthy manufacturing process.
Halfway around the world, Nvidia CEO Jensen Huang met with the Thai and Vietnamese prime ministers last week as the company makes inroads in Southeast Asia. Nvidia also announced plans to establish Nvidia’s first research and development center in Vietnam, along with the acquisition of Vietnamese healthcare startup VinBrain for an undisclosed sum. In Thailand, the company signed a cloud deal with a company called SIAM.AI Cloud. Huang also emphasized the importance of “sovereign AI,” meaning that every country should have its own AI infrastructure and models.
In China, however, Nvidia is facing new scrutiny: The State Administration of Market Regulation is reportedly investigating whether the chipmaker violated antitrust laws when it acquired the Israeli-American company Mellanox in 2020. China previously gave conditional approval of the nearly $7 billion deal, but more than four years later, with the US restricting Nvidia from selling its most powerful chips to Chinese companies, the country is seeking new ways to gain leverage. A Nvidia spokesperson said the company is “happy to answer any questions regulators may have about our business.”
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.
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.US takes a close look at TSMC and Huawei
The US Commerce Department is looking into whether Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, is — knowingly or unknowingly — producing computer chips for the Chinese technology giant Huawei.
TSMC is one of the most strategically important companies to the United States because of its overwhelming market share in the chip fabrication process. Chip designers such as NVIDIA, AMD, and Apple send their chips to be made at TSMC facilities. But it’s also located, as its name suggests, in Taiwan — and that makes its relationship with China, which doesn’t acknowledge Taiwan’s independence, geopolitically significant.
The US investigation, recently reported by The Information, is eyeing whether TSMC is manufacturing Huawei chips — either those used to power smartphones or AI applications. Under the Biden administration, the US has strengthened export controls, preventing US companies — or those reliant on US parts — from selling chips and semiconductor manufacturing equipment to Chinese companies. While Huawei has the most advanced AI chips in China, they lag significantly behind US chipmakers Nvidia, AMD, and Intel because they don’t have unfettered access to important middlemen like TSMC and the Dutch photolithography company ASML — that is, unless the US finds a major breach or loophole.
Commerce Secretary Gina Raimondo recently said she’s under “no illusion” that her department is completely sealing off China – so she knows that US-made chips and equipment are making their way to China through underground markets and intermediaries. The New York Times reported that hundreds of thousands of banned chips have been sold in the Shenzhen electronics markets alone.
Xiaomeng Lu, director of Eurasia Group’s geo-technology practice, said that the TSMC investigation appears to look at whether the company is following export control rules. “This question is slightly different than whether Huawei got restricted chips from TSMC through illegal channels,” she said. “If Huawei is doing that, which is a more geopolitically significant development than potential TSMC misconduct – and TSMC proves they are following all US rules and regulations, Huawei should be the one receiving severe penalties. And I am almost certain they will.”
A violation by TSMC would be legally risky – and a massive business mistake given the company’s closeness with the US and other Western nations it relies on. But the experts who spoke with GZERO are skeptical this is the case.
Hanna Dohmen, a research analyst at Georgetown University's Center for Security and Emerging Technology, said TSMC would be foolish to knowingly allow sales to Huawei — even through an intermediary.
“Given TSMC’s position in the US-China technology competition, it would be surprising if TSMC is knowingly providing its services and exporting TSMC-fabricated chips to Huawei or any third-party affiliates,” she said. “Such a brazen violation of US export controls would put it squarely at risk of significant legal, political, and reputational consequences.”
TSMC is also set to receive $6.6 billion from the US government, she notes, to build advanced fabrication facilities in Phoenix, Arizona. “For such a significant amount of taxpayer money, it will be important for TSMC to demonstrate that it is doing everything it can to comply with US regulations to avoid political and reputational fallout with policymakers on the Hill, the administration, and the public.”
The US has not yet alleged any wrongdoing and has merely opened an inquiry, and it could be months before the probe is completed.
If wrongdoing is proven, TSMC would be on the hook for major financial penalties, just as Seagate was last year when it was fined $300 million by the Commerce Department for illicit sales to Huawei. Such a revelation would also call into question the balance of power between the US and China, their race for AI, and Taiwan’s role in the middle.The logo of semiconductor company Advanced Micro Devices Inc (AMD) is seen on a graphics processing unit (GPU) chip in this illustration picture taken February 17, 2023.
AMD has a fancy new chip to rival Nvidia
The US semiconductor designer AMD launched a new chip on Oct. 10. The Instinct MI325X is meant to compete with the upcoming Blackwell line of chips from market leader Nvidia.
Graphics processing chips from Nvidia, AMD, and Intel have been the lifeblood of the artificial intelligence boom, allowing the technology’s developers to train their powerful models and deploy them worldwide to users. Major tech companies have clamored to buy up valuable chips or pay to access large data centers full of them remotely through the cloud.
Lisa Su, CEO of AMD, claimed that the market for AI data centers will balloon by 60% a year and hit $500 billion by 2028. Still, investors weren’t convinced by what AMD showcased: The company’s stock fell 4% in trading Thursday, perhaps because AMD didn’t announce any big new deals with customers, though it bounced back 2% on Friday.
AMD’s new chips feature increased memory and a new architecture that the company promises will improve performance relative to prior models. Nvidia is expected to release its much-anticipated Blackwell chips by early next year, as the rivalry between the two most important AI chip designers in the world only gets hotter.