Silicon Standoff: Navigating the US-China Semiconductor Trade War – Asia Tech Review
Welcome back,
This week’s newsletter is going out on a Tuesday thanks to a long weekend here in Thailand. We are diving into the US-China semiconductor war in this issue because, while it is a topic that features heavily with stories and analysis every week, we haven’t really drilled into it in much detail. So here we are.
Last week, we published an original story analysing which early-stage deals are becoming a hot topic among investors in Southeast Asia, written by my ex-colleague Ka Kay Lum. Check it out below and keep an eye out for more original stories from us.
Do share Ka Kay’s story if you enjoyed it—and be sure to follow Asia Tech Review on LinkedIn to keep up with the latest posts we put out.
We’ll see you again very soon.
Have a great week,
Jon
There’s a huge amount of action happening in the China-US semiconductor war.
The US government is placing heavy restrictions on lithography machines that are crucial to the development of chip-making capabilities, a key target China is chasing. America’s goal—described as a tough one by ARM’s CEO—has led to significant restrictions on exporting tech products, materials and services to China.
That has caused serious issues for US firms. These are strained times for the government, with US tech titans Intel, Nvidia and among those that will be hit since China, and its monstrous manufacturing industry, are key pieces of their business and income.
But it isn’t just US companies that are coming under pressure as the New York Times wrote:
It is also an unusual flexing of American regulatory power. American officials took the position that they could regulate equipment manufactured outside the United States if it contains even just one American-made part.
That is why the US is putting pressure on companies in countries like Japan and The Netherlands, which can be crucial partners for Chinese companies working to build its semiconductor ecosystem. The problem is, though, that these restrictions will really hit overseas firms like Dutch-based ASML, which said the US curbs should hit its China sales hard.
There is some reason for optimism, though:
Buried deep in more than 400 pages of rules issued on Tuesday, officials at the U.S. Bureau of Industry and Security (BIS) said they are open to the semiconductor industry’s input for finding ways to keep sending AI chips to China for small and medium-sized systems.
On the other side, Chinese tech rivals are winning more contracts than ever before:
Nearly half, or 47.25%, of all machinery equipment tenders by Chinese foundries from January to August 2023 were won by local manufacturers, according to an analysis of 182 tenders by Huatai Securities last month.
From July to August 2023, 62% were won by Chinese suppliers compared to only 36.3% from March to April, the brokerage’s analysts said.
There’s also the possibility that Huawei, which surprised the world when it put an impressive China-made processor in its recent Mate 60 Pro smartphone, steps up and fills a void in China. The US did, of course, stunt the Chinese firm’s presence overseas with a glut of restrictions on its products, but this new US government offensive opens an opportunity in Huawei’s domestic market.
Huawei’s Ascend AI chips are comparable to Nvidia’s in terms of raw computing power, analysts and some AI firms such as China’s iFlyTek (002230.SZ) say, but they still lag behind in performance.
Jiang Yifan, chief market analyst at brokerage Guotai Junan Securities, said another key limiting factor for Chinese firms was the reliance of most projects on Nvidia’s chips and software ecosystem, but that could change with the U.S. restrictions.
AI chips are also dragged into the despite, as the quote above references, and that could impact the AI chip development that Tencent and Alibaba are pouring billions into.
Apple CEO Tim Cook made a surprise visit to China as the US-China standoff threatens to hit Apple in a very key market.
WSJ noted that Cook travelled as Apple has apparently seen “weak” sales of its newest iPhone 15 in China—although the sales data on that doesn’t seem too clear yet. Still, Cook visited Apple Stories, key supplier LuxShare, and senior officials in China including the commerce minister. He also turned up at a gaming tournament for Tencent, which remains one of the biggest earners on the app store.
In unrelated news, Apple reportedly fired at least five employees from the China App Store following an internal probe into business misconduct—including infractions such as unsanctioned contact with mobile game developers or consultants working on their behalf.
Baidu unveiled the latest version of its Ernie AI model, claiming that its capabilities are on par with those of OpenAI’s pioneering GPT-4 model link
Sequoia is facing Congressional scrutiny over its investments in China link
To get an idea of the AI rush in China, two huge rounds from a similar set of investors were announced last week:
AI startup Baichuan raised $300M from Alibaba, Tencent, Xiaomi and many others—it was founded by Wang Xiaochuan, who started internet search engine Sogou, and previously raised a $25M angel round link
Zhipu AI, another AI startup, raised $342M from Alibaba, Tencent, Xiaomi, Meitu and others link
AI startup Hugging Face, which hosts more than 365,000 open-source artificial intelligence models, has been blocked in China link
The Chinese government has taken a "golden share" in Shenzhen Yayue Technology, a domestic subsidiary of Tencent link
Beijing is reportedly weighing a delayed approval for the $69B Broadcom-VMware deal link
Google made a number of moves at its Google for India event, including:
Partnering with ONDC—the government-founded e-commerce platform—to add metro ticket booking options to Google Maps link
Announcing plans to manufacture Pixel smartphones in India link
Partnering with banks and other lenders to offer loans to individuals and merchants on the Google Pay app link
Here’s the full list of announcements straight from Google link
The Indian government is planning to set up an India semiconductor research centre which will work towards research and development activities in advanced and next-generation of semiconductors, packaging and systems technologies, processes, and materials link
Space tech startup Agnikul raised $26.7M to prepare for commercial space launches link
Fintech startup Jiraaf raised $8.7M in series B round led by Accel, Harmony Partners and others link
Peak XV invests $35M in wealth and asset management startup Neo link
India is launching a new system of "authorisation" for imports of laptops, tablets and personal computers, aiming to monitor shipments of such hardware without hurting market supply link
Byju Raveendran, founder and chief executive of Byju’s, and his advisers are talking to private equity firms to discuss the sale of a controlling stake in Aakash Institute, considered the crown jewel of the troubled edtech. link
UK’s Prudential may lead a $100M-$150M round for Udaan which would see its valuation reduced to below $2B, having previously been $3.2B link
Singapore’s regulator has raised concern around Grab’s agreement plan to buy taxi rival Trans-cab link
Grab has been linked with an investment or deal with Indian electric vehicle ride-hailing company Blusmart link
Singapore-based Account Labs raised $7.7M for a Google-enabled crypto wallet link
Alibaba is trying to woo merchants from TikTok who sell in Southeast Asia after the short video app was forced to suspend e-commerce activities in Indonesia link
The Philippine military is creating a cyber command to improve defences against regular cyber attacks—it plans to relax recruitment rules to ensure it can attract online experts link
Singapore-based Cosmos Innovation which uses AI to optimise the design of powerful solar panels came out of stealth having raised $19.7M from Temasek and others link
Philippines-based exchange Coins.ph appears to have lost 12.2M XRP (around $6M) in possible exploit link
The CIO of Kakao has been arrested for alleged stock price manipulation around the bidding war over K-pop agency SM Entertainment, which Kakao owns a stake of, earlier this year link
Taiwan chipmaker Powerchip is said to be considering around five sites in Japan for setting up a potential $5.4B factory as talks on subsidies progress link
Honda, GM, Cruise plan to begin Japan driverless ride service in early 2026 link
Nvidia and Foxconn are working together to build so-called “AI factories,” a new class of data centers that promise to provide supercomputing powers to accelerate the development of self-driving cars, autonomous machines and industrial robots. link
TSMC expects ‘healthy growth year’ as Q3 profit beats expectations link
Foxconn has been subjected to tax audits at some of its key subsidiaries, suspected of violating laws and regulations, accordion to Chinese state media link
Pakistan’s InDrive wanted to make ride-hailing fairer—but drivers say it has made them poorer link
Thousands of remote IT workers sent wages to North Korea to help fund weapons program, FBI says link
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