Trump seeks to toughen Biden’s chip controls over China, and ask key allies match China curbs the US has placed on American chip-gear companies. How will Japan and Netherland response to that? Can China's chip industry overtake the US?
Your scenario is already ex-post. Biden wanted to starve China of technology. He had bullied Japan and Netherlands into submission. They dared not sell to China whatever machines and components that Biden forbade.
Biden’s problem was he did not know what China was cooking and what it has in the pipeline. China has a huge talent pool. It is an innovation powerhouse. Its developments were fast and numerous. Instead of being the hunter, he ended up playing catchup to China’s developments, to its frequent announcements of products and innovations. I suppose this is what his Commerce Secretary Raimondo meant when on the last days of her office, she called the whole exercise a Fool’s Errand.
But Biden was determined that US shall be the AI leader. Nvidia is the US bellwether of AI. He barred it from selling high-end AI chips to China. Trump was sold to the idea that AI dominance requires rising computing power, and large investments of money for large returns. So, with great fanfare, the bosses of Softbank, OpenAI, and Oracle, announced the establishment of a $500 billion AI fund that will ensure US leadership is unassailable.
But, lo and behold, along come DeepSeek. It spent only $5.6 million to teach its R1 model, a tiny fraction of the cost incurred by OpenAI’s o1. It achieves this through algorithm efficiency and innovation than relying on high-end chips. It made it open-source and even has mini “distilled” versions to allow researchers with limited computing power to use the model. It up-ended completely the thesis of ever rising computing power, big investments, and big returns. US attempt to dominate AI is curbed, in all likelihood, permanently.
Can China’s chip industry overtake the US?
This is not the point.
China’s purpose is democratic. Take DeepSeek’s open-source. It could make AI cheap, ubiquitous, not controlled by any one country or company, and is available for everybody.
This is not to say powerful AI chips are unimportant. Only that it is not the whole story.
China is one generation behind the US. Huawei Ascend 910C equals Nvidia’s last generation H100. Its 920 due in a year matches Blackwell, the latest Nvidia’s chip.
China is also catching up with production. Two the new SMIC fabs that will onstream this year and next each has capacity of 50,000 wafer per month, more than enough to meet its needs. Huawei plans to produce 100,000 910C and 300,000 910B chips this year.
Digitimes Asia reported that the yield in the manufacture of 910C has doubled from 20% to 40%, and is profitable. The aim is to increase it to 60% this year to match the industry norms. The yield for the older 910B is 50%.
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