Nvidia Corp, the world’s largest maker of artificial intelligence (AI) chips, has been called out by United States Commerce Secretary Gina Raimondo after it planned to launch downgraded products for China to get around the US chip export controls.
“Every day, China wakes up trying to figure out how to do an end run around our export controls … which means every minute of every day, we have to wake up tightening those controls and being more serious about enforcement with our allies,” Raimondo told an audience at the Reagan National Defense Forum in California on December 2.
“If you redesign a chip around a particular cut line that enables them to do AI, I’m going to control it the very next day,” she said in a warning to Nvidia, which had tried to ship A800 and H800 chips to China after the US banned the exports of the faster A100 and H100 chips in October 2022.
She said her department needs extra resources on top of the current US$200 million budget to strengthen the enforcement of the United States’ chip export controls. She stressed that China is “the biggest threat we’ve ever had” while “China is not our friend.”
Chinese state media criticized Raimondo for her comments. They said it’s contradictory that the US seeks to do business with China but sees the country as a threat, not a friend or a partner.
“At the Reagan National Defense Forum, Raimondo said the US wants to further develop business relations with China but she at the same time stressed that China is not a friend of the US,” a Beijing-based columnist using the pen name of “Haishangke” says in an article published on Monday. “She promoted the chip export controls against China as she wanted the US Congress to grant her a bigger budget.”
“When Raimondo visited China in August, She confirmed the establishment of a China-US working group on the deputy ministerial level and agreed to allow company representatives to participate in it. Isn’t it a close trade partnership between the two countries?” Haishangke says. “Why is China not a friend of the US? Is China a rival or a potential enemy of the US?”
“The US has not deeply reflected on the mistakes it has made in Sino-US trade,” he says. “It has not proposed any practical measures to improve the two countries’ bilateral relations, but shifted its responsibilities to China.”
He says the US is feeling anxious as it is being approached by China in terms of comprehensive national strength including economy. He says Beijing will continue to grow its AI markets until they are big enough one day that the US cannot resist.
‘Do business with everybody’
In October 2022, the US tightened its export rules to ban the shipment of Nvidia’s A100 and H100 chips to China. Nvidia then unveiled the A800 and H800 chips to meet the demand from China.
In August this year, Chinese internet giants including Baidu, Alibaba, Tencent and TikTok-owner ByteDance reportedly had ordered 100,000 A800 processors, as well as other graphics processing units (GPUs), from Nvidia for US$5 billion.
However, Nvidia could no longer ship its A800, H800, L40, L40S and RTX 4090 chips to China as the US tightened its export rules on October 17. The company tried to launch the H20 chips, a slower version of H100, for China’s markets but then delayed the plan to the first quarter of 2024.
“We’re a company that was built for business and so we try to do business with everybody we can,” Nvidia’s Chief Executive Jensen Huang told the media at an event in New York. “On the other hand, our national security matters and our national competitiveness matters.”
Huang described the Biden administration’s effort to delink China from US chip supply as an absolutely necessary effort for US national security.
But he added that a “total independence of the supply chain is not a real practical thing for a decade or two.”
He said the most cutting-edge Nvidia chips are not made available to China but the country can still find a way to obtain that technology or inspire domestic chipmakers, including Huawei Technologies, to match it.
Work with allies
On Saturday, Raimondo told an audience at the Reagan National Defense Forum that it’s important to protect the United States’ national security.
“I know there are CEOs of chip companies in this audience who were a little cranky with me when I did that because you’re losing revenue. Such is life; protecting our national security matters more than short-term revenue,” she said.
“Democracy is good for your businesses. Rule of law here and around the world is good for your businesses,” she said.
She said the US will also work with its allies, including Japan, the Netherlands and Europe, to implement its chip export ban.
Huo Jianguo, vice president of the China Society for World Trade Organization Studies, said it is not easy for the US to push other countries to enforce its chip ban against China. He said the US will have to pay high costs for implementing its chip export controls.
“The constant friction between US government departments and companies shows that artificial export controls are contrary to the laws of the market,” Zhou Mi, a researcher at the Chinese Ministry of Commerce, said Monday.
“US high technology firms know clearly that their revenue and future growth will be hurt if they lose the opportunity to grow their businesses in China, and that their technological progress will be hindered by the United States’ self-imposed restrictions,” Zhou said.
As of now, Nvidia has not felt pain yet as its products are in high demand globally. In the quarter ending October 29, the company’s revenue grew 206% year-on-year while its net income increased to US$9.24 billion from US$680 million.
Read: China to meet AI market demand with local chips
Follow Jeff Pao on Twitter at @jeffpao3
Is the US anyone’s friend? Surely not of the EU, surely not of Europe. Probably not of the world. Perhaps of the Moon, so far…