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Hard Numbers: Doctor vs. machine, Pony rides to an IPO, Hot chips, Foxconn’s crazy demand
4.5 billion: A Chinese self-driving car company, called Pony AI, is attempting to go public on the Nasdaq stock exchange. The company, which is backed by the Japanese automaker Toyota among others, is seeking a $4.5 billion valuation for its initial public offering. The company previously tried to go public in the US through a blank-check company, but plans fell apart when China cracked down on such deals.
72: Nvidia's new Blackwell AI chips are reportedly overheating when installed in server racks designed to hold 72 chips. The company has already faced delays due to design flaws with these chips and is now asking suppliers to modify the designs of the racks numerous times. This issue could further delay sales to the largest tech companies in the world, such as Google and Meta.
A microchip and the Taiwanese flag in an illustration.
TSMC set to get its CHIPS money
The award marked the first finalized disbursement of the CHIPS Act since it was passed in 2022 and will go toward building TSMC's three new chip factories in Arizona — helping offset the $65 billion cost.
A total of $36 billion has been approved by Congress and directed by the Commerce Department to foreign companies such as TSMC and Samsung, as well as US companies including Intel and Texas Instruments. The delays, in addition to the normal snail’s pace of bureaucracy, stem from the fact that the Commerce Department spent much of the past two years negotiating with semiconductor companies, procuring specific commitments before finalizing the amounts they’d receive.
President Joe Biden needs to disburse the payments quickly because the future of the CHIPS Act is in question. When Donald Trump takes office in January, he may fulfill campaign promises to dismantle the Biden initiative or ask the Republican-controlled Congress to repeal it. Alternatively, the president-elect could carry on with the disbursements, which could further a bipartisan goal of beating back China’s AI ambitions.
Middlemen help US chips into China and Russia
Joe Biden’s administration has been aggressively enacting export controls on China and economic sanctions on Russia, preventing US companies from selling powerful chips and semiconductor manufacturing equipment to both nations. But now attention is turning to middlemen enabling the flow of AI-grade chips into the countries.
A Mumbai pharmaceutical company reportedly sold more than 1,000 Dell servers containing Nvidia H100 processors to Russian companies between April and August of 2024, according to a Bloomberg analysis of international trade data. India isn’t held to US sanctions, so it’s not clear what recourse the US would have — except if Dell or Nvidia are knowingly selling to middlemen to get their chips into Russia.
Elsewhere in the world, Taiwan Semiconductor Manufacturing Company, the largest contract chipmaker in the world, suspended shipments to a Chinese chip designer Sophgo last week when it discovered its chips inside a Huawei processor. Huawei, China’s most important chip company, is subject to stringent US export controls, an attempt to keep Chinese industry and military at bay. As GZERO AI wrote last week, the US Commerce Department is investigating whether TSMC, a strategic commercial and geopolitical partner for the US that has received billions to build facilities in America, knowingly evaded US export controls to sell to Huawei.
Gina Raimondo, the US Commerce Secretary, recently said she’s under “no illusion” that export controls on US-made chips from Nvidia, AMD, and other semiconductor companies are perfect. But these reports underscore that sanction controls are a moving target — and a game of whack-a-mole both for companies seeking compliance and regulators seeking enforcement.US takes a close look at TSMC and Huawei
The US Commerce Department is looking into whether Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, is — knowingly or unknowingly — producing computer chips for the Chinese technology giant Huawei.
TSMC is one of the most strategically important companies to the United States because of its overwhelming market share in the chip fabrication process. Chip designers such as NVIDIA, AMD, and Apple send their chips to be made at TSMC facilities. But it’s also located, as its name suggests, in Taiwan — and that makes its relationship with China, which doesn’t acknowledge Taiwan’s independence, geopolitically significant.
The US investigation, recently reported by The Information, is eyeing whether TSMC is manufacturing Huawei chips — either those used to power smartphones or AI applications. Under the Biden administration, the US has strengthened export controls, preventing US companies — or those reliant on US parts — from selling chips and semiconductor manufacturing equipment to Chinese companies. While Huawei has the most advanced AI chips in China, they lag significantly behind US chipmakers Nvidia, AMD, and Intel because they don’t have unfettered access to important middlemen like TSMC and the Dutch photolithography company ASML — that is, unless the US finds a major breach or loophole.
Commerce Secretary Gina Raimondo recently said she’s under “no illusion” that her department is completely sealing off China – so she knows that US-made chips and equipment are making their way to China through underground markets and intermediaries. The New York Times reported that hundreds of thousands of banned chips have been sold in the Shenzhen electronics markets alone.
Xiaomeng Lu, director of Eurasia Group’s geo-technology practice, said that the TSMC investigation appears to look at whether the company is following export control rules. “This question is slightly different than whether Huawei got restricted chips from TSMC through illegal channels,” she said. “If Huawei is doing that, which is a more geopolitically significant development than potential TSMC misconduct – and TSMC proves they are following all US rules and regulations, Huawei should be the one receiving severe penalties. And I am almost certain they will.”
A violation by TSMC would be legally risky – and a massive business mistake given the company’s closeness with the US and other Western nations it relies on. But the experts who spoke with GZERO are skeptical this is the case.
Hanna Dohmen, a research analyst at Georgetown University's Center for Security and Emerging Technology, said TSMC would be foolish to knowingly allow sales to Huawei — even through an intermediary.
“Given TSMC’s position in the US-China technology competition, it would be surprising if TSMC is knowingly providing its services and exporting TSMC-fabricated chips to Huawei or any third-party affiliates,” she said. “Such a brazen violation of US export controls would put it squarely at risk of significant legal, political, and reputational consequences.”
TSMC is also set to receive $6.6 billion from the US government, she notes, to build advanced fabrication facilities in Phoenix, Arizona. “For such a significant amount of taxpayer money, it will be important for TSMC to demonstrate that it is doing everything it can to comply with US regulations to avoid political and reputational fallout with policymakers on the Hill, the administration, and the public.”
The US has not yet alleged any wrongdoing and has merely opened an inquiry, and it could be months before the probe is completed.
If wrongdoing is proven, TSMC would be on the hook for major financial penalties, just as Seagate was last year when it was fined $300 million by the Commerce Department for illicit sales to Huawei. Such a revelation would also call into question the balance of power between the US and China, their race for AI, and Taiwan’s role in the middle.The logo of semiconductor company Advanced Micro Devices Inc (AMD) is seen on a graphics processing unit (GPU) chip in this illustration picture taken February 17, 2023.
AMD has a fancy new chip to rival Nvidia
The US semiconductor designer AMD launched a new chip on Oct. 10. The Instinct MI325X is meant to compete with the upcoming Blackwell line of chips from market leader Nvidia.
Graphics processing chips from Nvidia, AMD, and Intel have been the lifeblood of the artificial intelligence boom, allowing the technology’s developers to train their powerful models and deploy them worldwide to users. Major tech companies have clamored to buy up valuable chips or pay to access large data centers full of them remotely through the cloud.
Lisa Su, CEO of AMD, claimed that the market for AI data centers will balloon by 60% a year and hit $500 billion by 2028. Still, investors weren’t convinced by what AMD showcased: The company’s stock fell 4% in trading Thursday, perhaps because AMD didn’t announce any big new deals with customers, though it bounced back 2% on Friday.
AMD’s new chips feature increased memory and a new architecture that the company promises will improve performance relative to prior models. Nvidia is expected to release its much-anticipated Blackwell chips by early next year, as the rivalry between the two most important AI chip designers in the world only gets hotter.
An illustration of US and Chinese flags in front of a circuit board with semiconductor chips.
China wants its companies to ditch Nvidia
Nvidia’s highest-end chips are off-limits to Chinese companies due to strict export controls from the US. That hasn’t stopped developers from either buying lower-grade chips or finding the best chips in underground markets, but that may soon change.
Beijing has reportedly begun urging its private sector to use Huawei’s chips instead of Nvidia’s chips. China’s government hasn’t made an official announcement on the matter — at least not yet. Analysts expect that Huawei’s newest chip could perform better than the China-specific chip currently marketed by Nvidia. Huawei’s chips are nowhere near as advanced as chips from Nvidia or AMD, but they are more advanced than the ones Chinese companies can legally buy.
That all results in Huawei getting a boost in business from China’s domestic AI sector. If it can offer a decent chip for running and training AI models, and the government pressures companies to buy from them, it could be a boon for their pockets and help them develop better tech in the future.
A computer chip with the letters AI on top of it.
How China smuggles sought-after chips
The US has placed strict limits on the sale of powerful chips to China. But in the underground electronics market in Shenzhen, the southeastern port city, vendors reportedly claim to be moving hundreds or even thousands of banned chips. These include Nvidia’s A100 and H100 series chips, their most advanced models.
One vendor said he arranged a $103 million shipment to a nearby warehouse. “The Shenzhen market cannot be restricted,” he told the Times. That these middlemen are getting their hands on powerful chips is a serious threat to US economic and national security priorities, as the Biden administration is dead set on limiting Chinese access to any technologies that can fuel the government’s AI ambitions. Commerce Secretary Gina Raimondo said recently that she’s under “no illusions” that her department is executing their goals perfectly and told the Times she’s limited by budget constraints.
A Chinese military with artificial intelligence at its fingertips is a nightmare scenario for the US, and while its export controls have limited what China can make, it might never be able to fully plug leaks in the mechanism.A photo illustration of a smartphone displaying the NVIDIA Corporation stock price on the NASDAQ market, with an NVIDIA chip visible in the background.
A chip bottleneck
Margrethe Vestager, the European Union’s competition chief, has warned of a “huge bottleneck” involving Nvidia. The US semiconductor company plays a pivotal role in designing chips necessary for training and running artificial intelligence models and applications — good for 80% of the market. In recent months, Nvidia has become a $3.1 trillion company — now the third-most-valuable firm in the world behind only Microsoft and Apple.
It’s too much of a good thing: NVIDIA’s chips are so in demand that it can’t make enough for AI firms looking to train bigger and better models. EU regulators are starting to wonder whether that bottleneck raises concerns over fair competitive markets.
In Singapore, Vestager told Bloomberg that the EU’s watchdogs are asking preliminary questions of Nvidia but haven’t made up their mind about any further regulatory steps. Vestager said a robust secondary market could relieve competitive concerns, implying that as long as Nvidia respects smaller firms it should stay in antitrust regulators’ good graces. Meanwhile, AMD and Intel are looking to close the gap with Nvidia, something that intense regulatory scrutiny on the market leader might aid.