Daily: US-China tech war spirals; Trump cuts BIS funding; Interview w Gelsinger
11 min read.
Housekeeping note: I am back after a week off on an overseas work trip. Today’s newsletter runs long, catching up on last week’s stuff.
Highlights
U.S.-China tech war spirals deeper. The U.S. blacklists another dozen Chinese companies. The list includes Inspur Group, which is China’s largest server producer and buys lots of Nvidia chips. This comes amid a broader trade war with China (20% tariffs and counting) and, though China’s reaction has been restrained so far, Beijing has signalled that they have a menu of options that they can still unleash on the U.S. and the rest of the world. There’s still lots of room for escalation yet.
Trump cuts BIS funding. Meanwhile, the Trump administration also kneecaps its own ability to enforce those (and other) chip controls as he cuts 10% of the funding for Commerce Dept Bureau of Industry and Security (BIS). Limited chip control enforcement was a major critique of the early Biden-era chip restrictions and it got a lot tighter towards the end of the Biden admin. But now Trump’s gutting of the civil service will likely hinder BIS’ ability to do its job well.
Interview w Gelsinger. Ex-Intel CEO Pat Gelsinger has a new job as General Partner at VC, Playground Global. He will focus on semiconductor and technology investments that are “somewhere between the improbable and the impossible.”
He also said in an FT interview that he does not think TSMC’s recent US$100b fab investments on U.S. soil is enough to revive American chipmaking industry. The key is R&D and that is still in Taiwan.
Thanks for reading.
1. Policy and Geopolitics
1.1
WSJ (03/26): Trump Takes Tough Approach to Choking Off China’s Access to U.S. Tech
The U.S. on Tuesday added dozens of Chinese companies to a trade blacklist over national security concerns. American businesses seeking to sell technology to these companies will need approval from the government.
Among those added were subsidiaries of Inspur Group, China’s largest server maker and a major customer for U.S. chip makers such as Nvidia, Intel and Advanced Micro Devices. Companies linked to China’s largest supercomputer maker, Sugon, were also added.
1.2
Bloomberg (03/27): Trump Blocks 10% of Funds for Key Agency in US-China Tech Race
A White House move to cut 10% of the funding for the agency responsible for semiconductor export controls risks undermining US efforts to stay ahead of China in the AI race, a group of Democratic senators warned.
The Trump administration on Monday effectively canceled $20 million in funding for the Commerce Department’s Bureau of Industry and Security, according to a statement from Democratic Senator Patty Murray, who sits on the chamber’s appropriations committee.
The decision drew sharp criticism from Capitol Hill, where lawmakers led by Senator Elizabeth Warren questioned Trump officials over the national security implications of the funding cuts.
1.3
Reuters (03/26): China seen leading in chipmaking investment again in 2025, SEMI group says
China will continue to invest more in new computer chipmaking equipment than any other geographical region in 2025, despite a significant year-over-year decline, industry group SEMI said in a report on Wednesday, followed by Taiwan and Korea.
In its fabrication plant spending forecast, SEMI said global investments in gear will rise 2% this year to $110 billion, the sixth consecutive year in a row of growth, due to investment in tools needed to make chips for artificial intelligence.
1.4
FT (03/28): Taiwan accuses Chinese chipmakers of illegally poaching engineers
Taiwan is investigating 11 Chinese technology companies, including the country’s leading chipmaker, on suspicion of illegally poaching its engineers, an indication of Beijing’s reliance on its neighbour’s world-leading semiconductor expertise.
Shanghai-based Semiconductor Manufacturing International Corp (SMIC) set up a Samoa-registered entity to “poach talent in Taiwan as a fake foreign investor”, Taiwan’s Justice Ministry’s Investigation Bureau (MJIB), the country’s equivalent to the FBI, said on Friday.
1.5
FT (03/27): TSMC’s $100bn pledge to Donald Trump will not revive US chipmaking, says ex-Intel chief
Taiwan Semiconductor Manufacturing Company’s pledge to spend an extra $100bn on advanced manufacturing plants in the US will do little to help the country restore its global lead in chipmaking, according to Pat Gelsinger, who was forced out as chief executive of Intel late last year.
“If you don’t have R&D in the US, you will not have semiconductor leadership in the US,” Gelsinger said. “All of the R&D work of TSMC is in Taiwan, and they haven’t made any announcements to move that.”
1.6
FT (03/26): Nvidia’s China sales face threat from Beijing’s environmental curbs
Beijing has introduced energy efficiency rules for the use of advanced chips that would prevent Chinese companies from buying Nvidia’s best-selling processors in the country if implemented strictly.
The National Development and Reform Commission, China’s top economic planner, is advising Chinese groups to use chips that meet stringent requirements in new data centres and expansion of existing facilities, according to documents reviewed and analysed by Financial Times.
Nvidia’s H20 chip — less powerful than its top-range graphics processing units but tailored to meet Washington’s export controls — currently fails to satisfy the commission’s new rules, according to the documents.
For several months, the Chinese regulator has quietly discouraged the country’s tech giants such as Alibaba, ByteDance and Tencent from purchasing H20 chips, said two people with knowledge of the matter.
1.7
Bloomberg (03/31): Japan Earmarks Another $5.4 Billion for Chip Startup Rapidus
Japan is preparing as much as ¥802.5 billion ($5.4 billion) in additional aid for chip startup Rapidus Corp., a move that reflects Tokyo’s growing resolve to secure semiconductors during a time of heightened US-China tensions.
That brings the total amount of public money earmarked for the country’s effort to build an advanced chip contractor to a maximum ¥1.72 trillion, plus another ¥100 billion that’s been proposed. Japan’s Economy Ministry is also pushing for debt guarantees to encourage more private sector investment into the fledgling company.
1.8
Bloomberg (03/21): Chip Companies Flood Germany With €6 Billion in Subsidy Requests
Companies in the chipmaking industry are asking for three times the available subsidies from Germany’s latest funding program, setting up one of the first challenges for the country’s next government.
Companies applied for a total €6 billion ($6.5 billion) in subsidies under a call issued by Germany’s outgoing political leadership in November, two people familiar with the matter said, asking to not be identified since the number is not public. Currently only €2 billion is available, Bloomberg reported.
1.9
FT (03/24): Malaysia to crack down on Nvidia chip flows under US pressure
Malaysia is planning to tighten regulations on semiconductors as it comes under US pressure to stem the illicit flow to China of chips crucial to the development of artificial intelligence.
Trade minister Zafrul Aziz said Washington was demanding Malaysia closely track the movement of high-end Nvidia chips that enter its territory over suspicions that many are ending up in China, in violation of US export rules.
He added that he had formed a task force with digital minister Gobind Singh Deo to tighten regulations around Malaysia’s burgeoning data centres sector, which relies on chips from industry leader Nvidia.
1.10
Bloomberg (03/26): Qualcomm Takes Legal Fight With Arm to Global Antitrust Agencies
Qualcomm Inc. has launched a global antitrust campaign against Arm Holdings Plc as the two longtime business partners jockey for advantage in the computing semiconductor market.
In private meetings and confidential filings to regulators on three continents, Qualcomm is arguing that Arm — its biggest supplier — is guilty of anticompetitive behavior, according to people familiar with the matter.
2. Economy, Finance, and Business
2.1
Reuters (03/31): TSMC affirms commitment to Taiwan with new domestic fab amid overseas expansion
TSMC said on Monday that its newly built domestic fab would add 7,000 tech jobs to the island's economy and that it will continue to expand in Taiwan, following concern that its investment in the U.S. will dilute its presence at home.
The new fab is on track to begin volume production of 2nm wafers in the second half of this year, as scheduled.
2.2
Bloomberg (03/29): Intel Board Members Leaving as Chipmaker Looks to Add Expertise
Intel Corp. said three members of its board of directors are retiring as it focuses on the kind of expertise needed for the chipmaker’s turnaround.
Omar Ishrak, Tsu-Jae King Liu and Risa Lavizzo-Mourey are retiring and won’t stand for reelection at the May 6 annual shareholder meeting, the company said in a regulatory filing. The board will shrink to 11 members following the appointment of Eric Meurice and Steve Sanghi — two chip industry executives — as independent directors last year.
2.3
WSJ (03/26): Former Intel CEO Pat Gelsinger Makes a Few More Long-Shot Bets
Gelsinger said Wednesday he is joining venture firm Playground Global as a general partner with a focus on semiconductors and other investments that lie “somewhere between the improbable and the impossible.”
And earlier this week he said he is expanding his role at faith tech startup Gloo, which helps churches, nonprofits and other faith-focused organizations get on the cloud and use advanced tech, becoming its head of technology and executive chair.
“I want to be focused on hard, long-term problems,” he said. It’s an area where he had plenty of experience at Intel.
2.4
WSJ (03/25): Samsung Electronics Co-CEO Dies, Worsening Tech Firm’s ‘Crisis’ Moment
The head of Samsung Electronics’s smartphone and consumer electronics business died from cardiac arrest on Tuesday, jolting the South Korean technology company during a business slide that leaders have called a crisis.
Jong-Hee Han, 63 years old, was appointed co-CEO of Samsung Electronics in December 2021. The company’s other CEO, Jun Young-hyun, oversaw the unit making semiconductors and other tech components.
Jun will lead Samsung as solo CEO effective immediately following Han’s death, the company said in a Tuesday filing. It isn’t clear if a direct replacement to Han will be named. “Our deepest condolences are with his family and loved ones during this difficult time,” the company said.
2.5
Bloomberg (03/24): AI Chip Startup FuriosaAI Rejects Meta’s $800 Million Offer
Korean chip startup FuriosaAI has turned down an $800 million takeover offer from Meta Platforms Inc., choosing instead to grow the business as an independent company, a person with knowledge of the matter said.
FuriosaAI is one of only a handful of Asian startups that have attracted Meta. Led by June Paik, who previously worked at Samsung Electronics Co. and Advanced Micro Devices Inc., it develops semiconductors for AI inferencing, or services. The eight-year-old company’s second-generation processor, RNGD (pronounced “Renegade”), is designed to challenge products from industry leader Nvidia Corp. as well as fellow startups Groq Inc., SambaNova Systems Inc. and Cerebras Systems Inc.
2.6
Bloomberg (03/26): Microsoft Abandons Data Center Projects, TD Cowen Says
Microsoft Corp. has walked away from new data center projects in the US and Europe that would have amounted to a capacity of about 2 gigawatts of electricity, according to TD Cowen analysts, who attributed the pullback to an oversupply of the clusters of computers that power artificial intelligence.
The analysts, who rattled investors with a February note highlighting leases Microsoft had abandoned in the US, said the latest move also reflected the company’s choice to forgo some new business from ChatGPT maker OpenAI, which it has backed with some $13 billion. Microsoft and the startup earlier this year said they had altered their multiyear agreement, letting OpenAI use cloud-computing services from other companies, provided Microsoft didn’t want the business itself.
2.7
FT (03/30): Smiths expands US manufacturing of chip testers, after trade restrictions
Engineering company Smiths Group has become the latest manufacturer to establish a route around US President Donald Trump’s trade policies, by preparing to make some of its semiconductor testing devices in Texas instead of China.
Chief executive Roland Carter told the Financial Times the FTSE 100 conglomerate had been shifting manufacturing of its semiconductor “sockets”, used to trial newly made chips, from Suzhou, in China, to Texas.
3. Technology
3.1
TrendForce (03/28): SMIC Reported to Complete 5nm Chips by 2025, but Costs May Be 50% Higher Than TSMC’s
Industry sources suggest that SMIC is on track to finalize its 5nm chip development by 2025. However, the report highlights that the cost of SMIC’s 5nm wafers could be as much as 50% higher than those produced by TSMC.
This price gap is largely due to SMIC’s lack of access to cutting-edge EUV equipment, forcing the company to rely on older DUV machines for its 5nm production.
The report highlights that SMIC’s 5nm wafer yields are reported to be only one-third of TSMC’s on the same process technology.
3.2
Bloomberg (03/24): Jack Ma-Backed Ant Touts AI Breakthrough Using Chinese Chips
Jack Ma-backed Ant Group Co. used Chinese-made semiconductors to develop techniques for training AI models that would cut costs by 20%, according to people familiar with the matter.
Ant used domestic chips, including from affiliate Alibaba Group Holding Ltd. and Huawei Technologies Co., to train models using the so-called Mixture of Experts machine learning approach, the people said. It got results similar to those from Nvidia Corp. chips like the H800, they said, asking not to be named as the information isn’t public.
3.3
Reuters (03/27): China's H3C warns of Nvidia AI chip shortage amid surging demand
One of China’s largest server makers, H3C, has flagged potential shortages of Nvidia's H20 chip, the most advanced AI processor legally available domestically under U.S. export controls, in a client notice seen by Reuters.
The potential supply crunch could create obstacles for China's artificial intelligence ambitions at a time when its tech firms are aggressively expanding their investments in AI.
3.4
Reuters (03/28): SiCarrier says its tools can help China make advanced chips
China can use domestically developed tools to make advanced semiconductors, countering U.S. curbs on Beijing's access to high-end chipmaking technology, an executive at a major Chinese supplier said on Thursday.
Du Lijun, president of chip equipment maker Shenzhen SiCarrier Industry Machines, said China faces export controls on access to lithography systems to make chips, but homemade tools could be employed instead to help it make 5-nanometer chips.
3.5
TrendForce (03/31): Intel Plans to Shift 3nm Production to Ireland in 2025, Expands Advanced Manufacturing in Europe
Intel’s new CEO, Lip-Bu Tan, has reaffirmed the company’s commitment to reviving its foundry business, and new plans regarding advanced node production have recently been unveiled. Intel is shifting high-volume production of 3nm chips to its Fab 34 facility in Ireland later in 2025, as noted by its 2024 annual report.
The report notes that one of the significant issues in the semiconductor supply chain is Europe’s lack of advanced process technology. Therefore, as the report highlights, the availability of the Intel 3 process through Intel Foundry Services could offer a critical advantage for the company as it strives to recover.
3.6
TrendForce (03/31): NVIDIA’s GB300 Rumored to Faces Delays, with Customer Testing Reportedly Pushed off to Q4
With NVIDIA’s GB300 debuting at GTC 2025 and trial production reportedly expected in Q2, chatter is heating up again over the challenges of scaling it up. Commercial Times suggests that customers may have to wait until Q4 to get their hands on GB300 samples for testing.
The delay, likely caused by the complexity of assembling GB200 server racks, is pushing CSPs toward more mature products and could add pressure on Taiwanese component and assembly suppliers, the report adds.