Chinese Tech Companies Forced To Think Outside The Box To Overcome US Chip Ban In The Race For AI Supremacy

Zinger Key Points
  • Nvidia’s A100 chip, the industry standard for training AI models, is banned for Chinese companies and institutions.
  • Chinese companies like Huawei are developing new creative techniques to overcome the chip embargo, like combining multiple slower chips.

Chinese companies are being forced to get creative to overcome a U.S. tech embargo that's choking the country out of one of the most valuable resources of the day: semiconductors.

A package of measures issued by the Biden administration bans U.S. companies from exporting advanced chips — and equipment used to produce them — to China.

The move is aimed at hampering Chinese manufacture and development of advanced semiconductors, key in training artificial intelligence models like ChatGPT and GPT-4.

By the time the sanctions were issued in October, Chinese institutions were producing 4.5 times more research papers on the topic of AI than American ones, according to a report released by State of AI.

The release of ChatGPT in November 2021 by OpenAI fired the starting pistol of an all-out race to dominate AI development, and due to U.S. sanctions, Chinese companies are lagging behind.

Microsoft MSFT was among the first major U.S. big tech companies to include a version of ChatGPT in one of its consumer products when it added natural language chat capabilities to its Bing search engine.

Nvidia's NVDA A100 chip is quickly becoming the industry standard for tech companies looking to train large AI models to perform tasks in the neighborhood of what ChatGPT can offer. The chip is high above those used in regular consumer electronics and costs around $10,000 each. The newer, improved version, called H100, is sold for over $30,000.

According to analysts interviewed by the Wall Street Journal, training a large language model like ChatGPT required between 5,000 and 10,000 of these chips, which are banned from China by U.S. measures.

Meta META owns over 21,000 A100s, according to State of AI, which tracks ownership of large supercomputers. Leonardo, a supercomputer developed by the European Union and hosted in a research center in Italy, considered the fourth-fastest computer in the world, uses 13,000 of these chips.

While Nvidia has developed chips that are not bound by U.S. restrictions to provide specifically to the Chinese market, the less powerful A800 is about 30% slower than the A100, according to reporting by TechCrunch.

This is pushing Chinese companies like Huawei, Baidu BIDU and Alibaba Group BABA to develop new techniques that allow them to compete in the global landscape without relying on state-of-the-art semiconductors.

While the Chinese government has announced large investments into the development of a domestic chip manufacturing industry, experts put China years behind Taiwan and Korea in its chip-making capabilities.

According to the WSJ, Chinese chips, as well as Nvidia's slower versions, are not enough to train large AI models in order to successfully compete with growing development coming from the west.

In late March, Huawei’s chairman said in a press conference that the U.S. chip embargo would boost a rebirth for China's chipmaking power, out of mere necessity.

According to a research paper reviewed by the WSJ, Chinese companies are combining multiple slower chips to achieve the processing power of one state-of-the-art semiconductor. In March, researchers at Huawei were able to successfully use these techniques to train large language models performing tasks in Chinese language.

Semiconductor stocks:

  • Broadcom Inc AVGO is down 0.1%.
  • Micron Technology Inc MU is down 0.5%
  • Advanced Micro Devices, Inc AMD is up 5.6%
  • Qualcomm Inc QCOM is down 0.3%.
  • Intel Corporation INTC is down 1%.
  • ETFs in the semiconductor sector are enjoying a day in the green.

    • VanEck Semiconductor ETF SMH is up 0.4%
    • BlackRock’s iShares Semiconductor ETF SOXX is up 0.3%.
    • Direxion Daily Semiconductor Bull 3X Shares SOXL is up 1%

    Shutterstock image.

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