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OpinionsTechnology Denial Don’t Work For Large Economies Like China And India

Technology Denial Don’t Work For Large Economies Like China And India


By Prabir Purkayastha

The chip wars between the US and China show no sign of abating as the US tries to stop the flow of advanced chips – sub 7 nm chips, graphical processor units (GPUs), 5G chipsets – and the lithographic machines that manufacture such chips. The US had started with sanctions that made it impossible for Huawei to manufacture its top-of-the-range processors at the heart of the 5G mobile phones. The US had then progressively widened the sanctions to advanced chip manufacturing lithographic machines and high-end computing processors, the GPUs from Nvidia. These GPUs power the new generative artificial intelligence (AI) thrust and the large language models like ChatGPT. Nvidia has emerged as the global heavyweight in the electronics manufacturing sector with its GPUs, a market capitalisation of 1.2 trillion dollars, and the 's 6th largest company by market cap.

The recent news of Huawei releasing its Mate 60 Pro mobile phones, which it claims are “satellite compatible,” has shocked the US industry. Various tech experts have examined the phone, including from Bloomberg, and say, “Huawei Technologies Co. and China's top chipmaker have built an advanced 7-nanometer processor to power its latest smartphone, a sign Beijing is making early progress in a nationwide push to circumvent US efforts to contain its ascent.” (Vlad Savov and Debby Wu September 4, 2023). The chipset, according to China Global Television Network (CGTN) post on the platform X (formerly Twitter), is Huawei's “first higher-end processor” since US sanctions were imposed and said the chipset it contains was manufactured by the Shanghai company Semiconductor Manufacturing Corp (SMIC).

There is now enough evidence produced by Bloomberg and other independent analysts that these claims are valid. In that case, it shows again that denial regimes do not work. The Semiconductor Industry Association and Boston Consulting Group had argued this in their 2021 Report, ‘Strengthening the Global Semiconductor Supply Chain in an Uncertain Era'. They had said that de-linking from the Chinese market would lead to China developing its indigenous manufacturing base and deny the US companies the large surplus they currently make from the Chinese market. It was also the same warning that Nvidia's chief had delivered only a few months back, “If (China) can't buy from . . . the United States, they'll just build it themselves”.

That technology denial does not work for large countries is the lesson had taught the US and the western countries after its 1974 Pokhran nuclear test when the US and its allies had imposed draconian technology sanctions on India. They denied India a range of technologies, including nuclear, electronics, rockets and advanced metallurgy. These sanctions failed to deter India's indigenous technology development. The only area where we failed to replace western technologies was chip manufacturing, which was more of a self-goal. Our flagship indigenous chip manufacturing plant, the Semiconductor Complex Ltd (SCL) in Mohali, was destroyed in 1989 by a “mysterious” fire, possibly a sabotage. We failed to rebuild this plant in the mistaken notion that only software matters, hardware chips can easily be bought from the international market.

We have known since last year that SMIC had successfully manufactured 7-nanometer (nm) chips for a bitcoin miner using its existing 28-nm ASML lithographic machines. These machines use the older DUV process, not yet under sanctions, and not the latest Extreme Ultra Violet (EUV) lithography process, which is under sanctions. Without the EUV machines, any chipset below 7 nm may be difficult, if not impossible, to manufacture at scale. But with 7 nm technology, Huawei's latest Kirin processors seem to have matched the latest iPhone speeds; if Bloomberg and other US tech websites are to be believed.

If this was not bad enough, Liu Qingfeng, the founder of HKUST Xunfei, an AI company, stated in Chinese Entrepreneurs Forum 2023 that Huawei has developed an AI GPU that matches the capabilities of Nvidia's A100 GPU. The US technology denial regime had banned the export of the latest version of A100 and the even more powerful H100 GPU chips to China. Even some West Asian countries (reportedly Saudi Arabia and UAE) have come under the ban on the suspicion that China may be using them to defeat US sanctions on GPUs. HKUST Xunfei and Huawei jointly announced that they will create AI platforms powered by Huawei processors, and the Chinese AI companies will no longer be limited by the denial of A100 or H100 GPU processors.

Liu Qingfeng did not provide details regarding the GPU's specifications, so such a claim needs to be verified. Unlike Huawei's 5G mobile claim, which independent observers have tested, this is still a claim made by a close associate of Huawei. But, given Huawei's record on 5G mobile phones, the possibility of a similar breakthrough for GPU design cannot be discounted either.

The fear of the chip manufacturing companies for quite some time has been that China is the biggest market for their products. Whether it is Nvidia, Apple, Intel, Qualcomm, or others, if the Chinese market is closed to them, this is a huge loss. The US administration believed that China would not be able to work around the chip bans and would either succumb to the US and sue for mercy, or be relegated to being no longer a peer technology competitor. This belief was the basis of the sanctions regime that the US has built. And temporarily, it did hit companies like Huawei hard and posed an impending threat to the entire hi-tech sector in China.

The Chinese response of independent product development was foreseen by the Semiconductor Industry Association and Boston Consulting Group in their 2021 Report, ‘Strengthening the Global Semiconductor Supply Chain in an Uncertain Era'. Their argument was that the Chinese market provides a large enough surplus for the US companies to fund a “virtuous cycle”, meaning that surplus from China, the biggest market for chips and hardware, funds the US innovations. If the US and China decouple, the US loses its biggest market and, therefore, will lose the innovation edge it currently enjoys from the surplus in their China trade.

Forcing China through sanctions to invest in innovation means that China may have a temporary setback but end in a long-term gain, as it is the world's biggest market. No, this was not an argument given by pro-China voices in the US but the US bourgeoisie – Semiconductor Industry Association–who runs the electronics industry in the US! Speaking to Financial Times in May 2023, Jensen Huang, the Taiwanese-American chief executive of Nvidia, currently the world's most valuable semiconductor company, reinforced this view that the US tech industry is at risk of “enormous damage” from the chip war between Washington and Beijing. He said that the US export controls introduced by the Biden administration against the Chinese semiconductor industry had left Nvidia with “our hands tied behind our back” and unable to sell advanced chips in one of the company's biggest markets. He had warned of China's capacity to replace the US manufacturers, a warning that seems to have come true only a few months down the line; what the Semiconductor Industry Association had warned the US administration two years back.

The US and its allies still have a trump card in ASML, the company that builds the most complex and hi-tech machine in the world: the lithographic machines that create intricate patterns on silicon using extreme ultraviolet (EUV) light. For any chip that needs to go below 7 nm, it appears EUV lithography is a necessity. Can ASML EUV machines mean the difference between the US and its allies and China?

As of now, the Chinese company that is building lithographic machines, Shanghai Micro Electronics Equipment, has yet to launch its 28 nm machine. According to reports, it plans to launch these machines in the market by the end of this year. If it indeed succeeds – and it is still a question mark – then SMIC, which currently uses the older 28 nm lithographic ASML machines, may not be hit by the proposed US ban on sales of even these machines to China.

Most experts believe that going below 7 nm may not be possible with 28 nm lithographic machines. The question remains: How critical are sub-7 nm chips? Can more advanced packaging, using a combination of chips – chiplets – and not such high-density chips, provide China an alternate route? These are questions for the future. And once a country as large as India and China make up their minds to develop technology on their own, they have the resources, both human and financial, to do so. De-linking, or as US now calls it, de-risking – de-linking by another name – does not work, not for large economies and not for any length of time.

Courtesy: People's Democracy



The Northlines is an independent source on the Web for news, facts and figures relating to Jammu, Kashmir and Ladakh and its neighbourhood.

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