To the extent corporations are inclined to pretend there’s something ambiguous about the Biden administration’s de facto “You can’t sell advanced technology to China anymore” directive, expect the US government to implement new restrictions aimed at clearing up any confusion.
Companies are torn between, on one hand, the imperative of staying in the good graces of the US Commerce Department and Janet Yellen’s Treasury and, on the other, the risks that go along with wholehearted participation in the US effort to stymie China’s technological development.
Most companies aren’t terribly excited about having to pick a side given China’s economic prowess and the perception that, over time, the country will overtake the US on several fronts. In the here and now, though, there’s nothing complicated about the decision calculus. The White House isn’t going to allow US companies (or any companies if push comes to absolute shove) to facilitate, let alone accelerate, Xi Jinping’s quest to compete in areas like quantum computing and A.I.
If that sounds unfair to you, that’s because in some respects it is, but so is life, and the choice between irritating Xi and running afoul of US export restrictions and sanctions is no choice at all.
It’s with that in mind that the Biden administration is apparently prepared to target a Nvidia chip designed specifically to underperform thresholds associated with banned technology. Nvidia makes a chip for the Chinese market, but according to The Wall Street Journal, the US intends to prevent the company from selling it to China without a license. That product almost surely wouldn’t be alone on any new list of technology covered by the updated measures.
“The A800 meets the US government’s clear test for reduced export control and cannot be programmed to exceed it,” Nvidia said late last year, announcing the onset of production. New rules could change that. Western governments and their allies have placed, or are planning to place, dozens of restrictions on chip exports to China, citing national security concerns and, relatedly, the prospect that the technology could be co-opted by the PLA.
I won’t spend an inordinate amount of time editorializing around the new restrictions, which aren’t yet finalized, but I’d be remiss not to state the obvious: Nvidia is now an absolutely critical piece of the puzzle for cap-weighted US benchmark indexes, and after this year’s astounding rally, the shares are arguably priced to perfection.
Whether or not any hit to revenue from an enhanced export ban would be material for Nvidia in the context of the massive windfall many expect from generative A.I.-related sales to customers in countries not subject to US restrictions, the takeaway is simple: Any business operating in the A.I. space will almost invariably find itself caught in the crossfire between Beijing and Washington. We can only hope that “crossfire” remains figurative.
Related:
Yellen Stakes Out US Position Ahead Of China Tech Restrictions
I’d expect tighter restrictions on semi-cap exports to China as well. Then increased Chinese responses, along the lines of what hit MU.
So who else aside from US and Netherlands make semicap equipment? Well, Japan. Not cutting edge stuff, but China needs lagging-edge semi fabs too.
Indeed
https://www.reuters.com/technology/us-dutch-set-hit-chinas-chipmakers-with-one-two-punch-2023-06-29/
As usual, the government is ignoring its own data on a critical issue. At present, 64% of all the doctoral candidates and 68% of all the masters students studying in the US are international students. Without them we wouldn’t even be making these chips we are trying to guard. We can’t get enough native US students to do the research required by our own technology programs. Without the international students in our programs and serving as critically needed TAs, many important university STEM programs would collapse. Without the doctoral students our supply of future college instructors will wither. Our native students just can’t be bothered to undertake the work required to get a doctorate any more. They just want a better life. Many of our leading tech companies, like Garmin, were founded by international graduates. Our banks, manufacturing firms, pharmaceutical firms, IT companies, and many others are run my execs who got their MBAs and PhDs here. Some may think this is some sort of joke but it’s not. The business school from which I retired runs two offshore MBA programs in China. These two programs provide us with more than half of those to whom we award degrees annually. These programs are AACSB accredited. We need to wake up, trying to become independent is so old. It’s killing those proud Brits who somehow still believe they matter. It will do the same to us. Do we really think we will cripple China with this ill-conceived embargo? It will cost our firms money they need to grow. It will reduce confidence in us as a supplier. It may well cost us students we need to develop our STEM faculty and students. We used to have a high leverage graduate education system in the US. Now, with two thirds of the students in these programs from overseas and many more 2nd generation children of immigrant parents, we have lost most of our leverage and have no real educated base of native students to fall back on. If we don’t start electing adults soon, and stop worrying about who gets to use which bathrooms and what books we are allowed to read, we are well and truly doomed. Next time you vote your stock look at the names of the board members.
I suppose AI had better get cracking then 🙂