Alibaba Group Holding Limited BABA and start-up Biren Technology tweaked their most advanced chip designs to reduce processing speeds and bypass U.S.-imposed sanctions, the Financial Times reported.
Alibaba, Biren, and other Chinese design houses have spent years and millions of dollars creating the blueprints for advanced processors to power the country's next generation of supercomputers, artificial intelligence algorithms, and data centers.
The biggest contract chipmaker Taiwan Semiconductor Manufacturing Company Ltd TSM, produces these offshore.
Analysts said Washington's sanctions, of which the high-end processor restrictions are one part, aimed to slow China's tech sector development forcibly.
"Attempting to freeze a country in place for a technological level of hardware is a big deal," said Paul Triolo of ASG. Triolo said high-end processors were the building blocks for research into supercomputing and A.I., which power everything from autonomous driving to drug discovery.
"If Commerce doesn't give out licenses, then China has a real problem," he said.
When Washington unveiled the controls, Alibaba and Biren had already conducted expensive test runs of their latest chips at TSMC. The rules have forced the companies to halt further production and change their designs.
Biren tweaked its designs to reduce processor speeds to get them manufactured by TSMC.
Archived versions of Biren's website from before the U.S. imposed sanctions show specifications for its first processor, the BR100, that would give it a transfer rate of 640 GB/s, exceeding the U.S. limits. According to Bernstein, Biren's site offers slower specs for the BR100 of 576GB/s.
Dylan Patel of SemiAnalysis, who first noticed Biren's change of specs, said the company was attempting to slow down its processors by disabling part of the chip.
Alibaba's T-Head semiconductor unit reportedly studies how to modify its new 5-nm processor designed for A.I. work.
Contemplated changes could require another production test run at TSMC, which would mean a months-long delay and cost $10 million.
The unit's biggest fear was turning into HiSilicon, the chip design unit of telecom equipment maker Huawei Technologies Co, Ltd, shattered by U.S.-imposed sanctions.
Price Action: BABA shares traded lower by 0.33% at $69.58 on the last check Monday.
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