The Chairman of the Senate Intelligence Committee in the United States stated on Tuesday (June 18th) that American intelligence agencies need to do a better job at tracking China’s advancements in technology and other areas.
Senator Mark Warner, a Democrat from Virginia, expressed during a breakfast event hosted by the Christian Science Monitor, “Our intelligence community is accustomed to traditional espionage activities, monitoring militaries and governments, but may not necessarily be tracking all tech companies or paying attention to where China is extracting rare earth minerals. We need to continue enhancing our focus on China’s actions, not just in the chip sector, but frankly, in many other areas as well.”
Senator Warner mentioned that Intel has had “several missteps” leading to Semiconductor Manufacturing International Corp (SMIC) gaining the capability to produce advanced 7-nanometer semiconductor chips. He also discussed some issues regarding other chip manufacturing toolmakers and expressed concerns about China’s developments in life sciences and biotechnology.
He added, “All signs indicate that China is making relentless investments to not only succeed but also dominate.”
According to Reuters, in February, upon learning that SMIC’s most advanced factory was producing precision chips for the Huawei Mate 60 Pro smartphone, the Biden administration cut off channels for the factory to import more products from the United States.
Warner believes that the United States still needs to do better in order to effectively restrict the supply of chips and chip manufacturing tools to China.
In 2022, the Biden administration began prohibiting US companies from selling the most advanced chips and equipment to China without special licenses. They also convinced allies like Japan and the Netherlands to impose their own bans and prevented other foreign chip manufacturers using US technology, like TSMC, from producing advanced chips for Chinese firms.
Furthermore, for national security reasons, the US Department of Commerce announced on December 18, 2020, that dozens of Chinese companies were added to a trade control blacklist. The Department specifically mentioned China’s largest chipmaker, SMIC, and restricted its access to key US technologies.
While facing US sanctions, the Chinese Communist Party continues to invest heavily in developing its domestic semiconductor industry. On May 24 this year, the National Integrated Circuit Industry Investment Fund (National Fund) Phase Three was officially established with a registered capital of 344 billion RMB, being the largest among the three national funds initiated by the CCP.
China can currently manufacture 7-nanometer chips, but they lag two generations behind the most advanced semiconductors commercialized today and are seeking to develop 5-nanometer chips. TSMC uses ASML’s extreme ultraviolet lithography equipment to produce even more advanced 3-nanometer chips, but due to US export controls, such advanced tools cannot be sold to China. At the US’s request, even some DUV from ASML has been banned from being sold to China.
Warner lamented that, “Unfortunately, there may be some Western chip manufacturers still deliberately or inadvertently circumventing the bans, selling tools and products to China.”
In late July 2023, Chairman of the US House of Representatives Special Committee on US-China Strategic Competition, Republican Representative Mike Gallagher, and senior committee member and Democratic Representative Raja Krishnamoorthi, wrote to the US Secretary of Commerce, urging the US government to further strengthen export controls on China to cut off China’s access to high-end AI chips produced by American companies like Nvidia, AMD, and Intel.
According to Voice of America’s report on August 9 last year, to meet this control requirement, Nvidia quickly tailored the A800 chip for the Chinese market, capping the data transfer rate at 400GB per second, replacing the higher-end A100 chip with a rate of up to 600GB per second. The company stated that the A800 meets the technical requirements for artificial intelligence system development.
Other US chip companies are also hoping to capitalize on the revival in China’s market for computers, servers, and 5G communication, following Nvidia’s approach of customizing chips for the Chinese market.
In July 2023, Intel announced the customization of the Gaudi2 chip for the Chinese market for AI deep learning. AMD also revealed on August 1 of the same year that they were considering adjusting the specifications of their AI chip products similarly to Nvidia. It is expected that AMD may adjust the rate of its latest MI300 AI chip, and their older MI250 chip might also be exported directly to the Chinese market to evade US export controls.
Gallagher and Krishnamoorthi recommended in their letter that the US export ban should further relax the data rate requirements to prevent Chinese companies from circumventing the bans through “clever engineering” to mitigate the impact on their AI tech development.
According to Reuters reported in June last year, the Biden administration is considering further restricting chip technology exports to China, expanding the ban beyond chip speeds. However, the plan faced opposition from US chip giants. Nvidia expressed that this would lead to a “permanent loss of opportunities for the US industry in the Chinese market.”
In July of that year, the three major US chip giants – Intel, Nvidia, and Qualcomm – sent company executives to Washington to lobby US government officials and lawmakers to abandon new restrictions on chip exports to China.
Warner also stated that he hopes US investors in ByteDance, the parent company of TikTok, can urge China to at least sever the “non-China portion” of this popular short video app used by 170 million Americans.
US investors hold approximately 40% of ByteDance. Warner stated that he is unsure if China will allow the sale of TikTok.
The US Congress passed legislation in April this year requiring ByteDance to divest its assets in the US by January 19 next year, or else face total banishment. TikTok and ByteDance have filed a lawsuit in federal court seeking to overturn this legislation.
Although Senator Warner expressed opposition to the ban, he stated, “Regardless, the law is the law.”