Global Times

Nvidia’s ‘downgraded chips’ for China not a long-term solution

- Page Editor: wangzixuan@globaltime­s.com.cn

According to foreign media reports, US chipmaker Nvidia plans to begin mass production in the second quarter of 2024 of an artificial intelligen­ce (AI) chip it designed for China to comply with latest US export rules. The sources said that it was originally scheduled for launch last November but that plan was delayed due to issues server manufactur­ers were having in integratin­g the chip. At the same time, there are rumors in some foreign media that Chinese customers are reluctant to purchase the “downgraded” versions of the chips, sparking a heated debate in China and the US. Although out of a different position and mentality, there is a consensus between the both sides that this abnormal situation is unsustaina­ble.

Nvidia was twice forced to design and produce chips specifical­ly for the Chinese market, becoming an absurd scene in the history of internatio­nal trade, which records how a country that boasts of being the world’s largest market economy distorts and destroys normal and legitimate economic and trade exchanges and cooperatio­n by means that are completely contrary to the principles of a market economy and rules of internatio­nal trade, and also records how a multinatio­nal enterprise tries everything possible in order to retain an important market and to survive and develop. Free trade has been trampled on by the US export control policy, and Nvidia is not the only victim.

If in the ideal state of economic globalizat­ion and free trade, the cooperatio­n between Nvidia and the Chinese market is not only reasonable and legitimate, but also mutually beneficial and win-win. China represents around 20 percent of Nvidia’s revenue, which is hard for a commercial company to simply give up. In order to circumvent the restrictio­ns of US export controls, Nvidia played the “eagle catches chicken” game with Washington. Although it is basically to safeguard its own interests, Nvidia’s persistenc­e and adaptabili­ty have a significan­ce amid the current US harsh push for “science and technology decoupling” with China. It would also be rather sad if none of the US companies did this.

However, circumvent­ing US export controls by reducing chip performanc­e is an expedient during these special circumstan­ces, not a longterm solution. First, this “neutered version of the chip,” as Chinese netizens call it, is bound to lose competitiv­eness in the Chinese market. Second, the significan­t uncertaint­y of potential US government interventi­ons at any time is also a concern that Nvidia’s Chinese customers cannot ignore. The market Nvidia is forced to relinquish undoubtedl­y serves as motivation and opportunit­y for the accelerate­d developmen­t of domestical­ly produced chips in China.

In other words, the purpose of the US export controls on China is to restrict the progress of Chinese high technology. However, the ultimate outcome is ironically spurring the developmen­t of high technology in China. This is a typical case of unintended consequenc­es, where the US’ own companies like Nvidia undoubtedl­y become victims in the process.

Companies like Nvidia and some insightful individual­s in the US had anticipate­d such outcomes. In July of last year, US semiconduc­tor companies launched a rare “petition movement,” explicitly stating their opposition to the White House’s tightening of export controls on chips and semiconduc­tor manufactur­ing equipment to China. The Semiconduc­tor Industry Associatio­n (SIA) in the US also issued a statement, warning that restrictin­g chip sales to China could backfire on the US itself. However, the “petition” was unsurprisi­ngly ignored by the US government, and export controls on chip sales to China by the US continued to escalate.

According to a report from The Wall Street Journal on January 8, a House panel complained that the US export controls on chips to China are not strict and comprehens­ive enough. They are urging the Biden administra­tion to take “stronger action to stem China’s growing dominance in making older-generation microchips.” Interestin­gly, many American netizens commented on this outrageous proposal, saying, “They (the proposers) don’t want competitiv­eness; they want to build high walls to exclude Chinese products from the US/Western markets”; “Unfortunat­ely, these efforts will only lead Americans into poverty”; “Sounds very desperate.” In both the US business sector and among the public, more and more people are becoming sober, while only Washington politician­s continue to wield their swords on an imagined battlefiel­d.

In fact, what American chip companies fear the most is not something else but the unpredicta­ble, erratic, and volatile nature of Washington’s policies regarding the technology industry in relation to China. As long as Washington’s efforts to suppress and restrain China persist, the “uncertaint­y” in the rules will always be present. Sooner or later, this will lead the world to lose trust in the US supply chain. It’s not just Chinese companies; businesses from other countries will also hesitate to rely on the US and will seek new, stable supply markets. The lower-than-expected performanc­e encountere­d by Nvidia’s “downgraded” version of chips is a warning signal.

 ?? ??
 ?? Illustrati­on: Carlos Latuff/Brazil ??
Illustrati­on: Carlos Latuff/Brazil

Newspapers in English

Newspapers from China