Winner, Winner Tako Dinner
There are few winners in the trade wars between the US and China, with the Chinese semiconductor industry now severely limited as to its access to what is basic semiconductor technology, along with existing restrictions on advanced tools. The recent round of restrictions, which restrict IC design software were another blow to China's chi’ advancement, however the even more recent ban by the US government on the sale of NVidia’s (NVDA) A100 and H100 to firms in China, will put a dent on China’s burgeoning AI project portfolio, and foster a growing fear in China’s AI community that restrictions will be placed on all NVidia products, which are the heart of most AI learning systems.
Nvidia owns almost the entire GPGPU (General Purpose Graphics Processing Unit) market, and while these devices are the heart of computer gaming systems, they are also contain a GPU that is able to perform ultra-high speed mathematical transformations that are used to mine bitcoin. That said, more importantly is their use in systems that ‘teach’ AI devices by processing large datasets that allow for various types of matching or recognition by the AI. As the larger the dataset, the more ‘examples’ the AI can learn from, the necessity for high speed is absolutely essential, with the Nvidia A100 delivering 312 TFLOPS (TeraFloating Point Operations per Second or 312 million decimal based simple math functions/second).
While the ban does not go into effect for US companies with data centers in China until March of next year, license requirements for direct sales to Chinese firms begins immediately.
While the collateral damage to Nvidia is substantial, AMD (AMD) who also faces some restrictions on its high-end GPUs says the impact will be small, but while the bans will put a dent in US company sales, it will limit China’s ability to grow its AI development, a key piece of Chinese technology strategy. However there is a silver lining for one company, albeit not a US one, and that is Shanghai Tainshu Zhixin Semiconductor (pvt) aka Iluvatar CoreX, the only company in China able to produce a GPU that compares to the Nvidia or AMD CPUs. The company was formed in 2013 as a joint venture between the Shanghai government and Taiwan based Via Technologies (2388.TT). The company has raised $334m in two rounds, the most recent being $149m raised in July of this year (previous was 3.2021). The company has developed a high speed GPU that is specifically designed as an AI ‘training’ processor and does not contain the additional hardware for gaming that is found in the Nvidia GPU system.
The Tiangai 100 chip, Iluvar’s first release took about four years to design and produce and is said to have received ~$33m in orders since its announcement at the World AI conference, has a performance rating of 147 TFLOPS (company), but things have not been all that pretty for the company up until the recent announcement. It seems the company’s chairman, Diao Shijing, previously the co-president of Tsinghua Unigroup’s (state) semiconductor business and executive director of YMTC (pvt) (see our note of 9/12/22), have been under investigation by the Chinese government and as of the middle of last month were still ‘missing’. The investigation centers around the bankruptcy of Tsinghua Unigroup, a company in which Taiwan based Foxconn (2354.TT) is hoping to make an $800m investment, although that investment is being investigated by the Taiwanese government due to Tsinghua’s ties to the Chinese military.
All in, while there continues to be considerable collateral damage on both sides as the US/China trade war continues, China continues to fund almost anything that is semiconductor related, and while still struggling under some of the more rigorous US semiconductor restrictions, seems to be making at least a bit of progress toward trying to reduce the semiconductor technology gap with the US. The Chinese government’s strategy of developing a technological industry by funding everything and hoping that some of the spaghetti sticks to the wall can be a messy one, as much of the capital is loosely supervised, but that strategy worked with LEDs and LCD displays, so we expect more funding and a few more ‘disappearing’ semiconductor executives over the next few years. While South Korean panel producers saw the handwriting on the wall for LCDs years ago and made the transition to OLED, ceding LCD to China, we doubt the US has the mindset to even imagine that China could one day become an equal in the semiconductor space and will fight such a battle to the last man or woman, cutting the tentacles from any Chinese semiconductor successes with new sanctions, like a Sushi chef preparing Tako.
Nvidia owns almost the entire GPGPU (General Purpose Graphics Processing Unit) market, and while these devices are the heart of computer gaming systems, they are also contain a GPU that is able to perform ultra-high speed mathematical transformations that are used to mine bitcoin. That said, more importantly is their use in systems that ‘teach’ AI devices by processing large datasets that allow for various types of matching or recognition by the AI. As the larger the dataset, the more ‘examples’ the AI can learn from, the necessity for high speed is absolutely essential, with the Nvidia A100 delivering 312 TFLOPS (TeraFloating Point Operations per Second or 312 million decimal based simple math functions/second).
While the ban does not go into effect for US companies with data centers in China until March of next year, license requirements for direct sales to Chinese firms begins immediately.
While the collateral damage to Nvidia is substantial, AMD (AMD) who also faces some restrictions on its high-end GPUs says the impact will be small, but while the bans will put a dent in US company sales, it will limit China’s ability to grow its AI development, a key piece of Chinese technology strategy. However there is a silver lining for one company, albeit not a US one, and that is Shanghai Tainshu Zhixin Semiconductor (pvt) aka Iluvatar CoreX, the only company in China able to produce a GPU that compares to the Nvidia or AMD CPUs. The company was formed in 2013 as a joint venture between the Shanghai government and Taiwan based Via Technologies (2388.TT). The company has raised $334m in two rounds, the most recent being $149m raised in July of this year (previous was 3.2021). The company has developed a high speed GPU that is specifically designed as an AI ‘training’ processor and does not contain the additional hardware for gaming that is found in the Nvidia GPU system.
The Tiangai 100 chip, Iluvar’s first release took about four years to design and produce and is said to have received ~$33m in orders since its announcement at the World AI conference, has a performance rating of 147 TFLOPS (company), but things have not been all that pretty for the company up until the recent announcement. It seems the company’s chairman, Diao Shijing, previously the co-president of Tsinghua Unigroup’s (state) semiconductor business and executive director of YMTC (pvt) (see our note of 9/12/22), have been under investigation by the Chinese government and as of the middle of last month were still ‘missing’. The investigation centers around the bankruptcy of Tsinghua Unigroup, a company in which Taiwan based Foxconn (2354.TT) is hoping to make an $800m investment, although that investment is being investigated by the Taiwanese government due to Tsinghua’s ties to the Chinese military.
All in, while there continues to be considerable collateral damage on both sides as the US/China trade war continues, China continues to fund almost anything that is semiconductor related, and while still struggling under some of the more rigorous US semiconductor restrictions, seems to be making at least a bit of progress toward trying to reduce the semiconductor technology gap with the US. The Chinese government’s strategy of developing a technological industry by funding everything and hoping that some of the spaghetti sticks to the wall can be a messy one, as much of the capital is loosely supervised, but that strategy worked with LEDs and LCD displays, so we expect more funding and a few more ‘disappearing’ semiconductor executives over the next few years. While South Korean panel producers saw the handwriting on the wall for LCDs years ago and made the transition to OLED, ceding LCD to China, we doubt the US has the mindset to even imagine that China could one day become an equal in the semiconductor space and will fight such a battle to the last man or woman, cutting the tentacles from any Chinese semiconductor successes with new sanctions, like a Sushi chef preparing Tako.
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