Firms react to Capitol call

Redesigning chips for China?

When the Biden administration announced another round of restrictions on exports of semiconductor chips to China last month the news put hundreds of millions of dollars of sales at risk.

Investors took fright, selling down the shares of US semiconductor firms in dramatic fashion.

One of the companies most affected: design giant Nvidia. It warned that it could miss out on $400 million of business involving sales of the processors that power supercomputers, artificial intelligence and high-end data centres.

The California-based company has already reacted to the threat to its sales, however, with chief executive Jensen Huang telling Caixin this week that it is offering alternative formats of its chip that won’t breach the parameters of the ban.

Specifically Nvidia is releasing the A800 GPU, a graphics processing unit that won’t work with other chips at transfer speeds that exceed rates of more than 600 gigabytes per second, the threshold in Washington’s embargo.

“There are versions that are not going to be restricted and serve the needs of the vast majority of our market very comfortably,” Huang explained as to how Nvidia is responding to the export hurdles.

The US regulations have banned the export of advanced microchips as well as the equipment that produces them to China’s chipmakers, in a bid to slow advances in its semiconductor sector.

Nvidia’s more advanced technology – the A100 and H100 formats – won’t be sold to Chinese customers without special government approval, for instance.

The authors of the export restrictions will see Nvidia’s announcement as a signal that the strategy is working in choking off access to the latest generation of chip technology. And the same embargo is also slowing the progress of Chinese chip designers, including Alibaba and Biren Technology, that are relying on Taiwanese foundry TSMC to make more advanced processors on their behalf.

Washington’s sanctions cover chipmakers in other countries that rely on American software and equipment, which blocks foundries like TSMC from fulfilling their contracts with customers from China. That’s forcing firms like Biren and Alibaba into redesigning their semiconductors at lower levels of performance, industry insiders told the Financial Times this week.

Biren’s mistake was releasing the high-performance specs of its chip designs, which forced the industry-leading Taiwanese foundry to initiate a contract review, the founder of another fabless firm told the newspaper. “You have to be low-key,” he explained of the error. “They’ve done too much PR and their specs are out there in black and white. Now its difficult for TSMC to help them find a way out.”

Other chip designers are complaining that the export controls are unclear because there are different ways in which transfer speeds can be calculated, the FT says. Maybe that will give them some wriggle room with the foundries in keeping production going.

But in the meantime, chip designers will look for ways of slowing processing speeds, which – if successful – should keep their manufacturing contracts alive.

Simply disabling the higher-performance elements in their designs isn’t going to be acceptable to the US government either, experts say, because of concerns that the superior performance could be reactivated at some later stage in the supply chain.

Some of Nvidia’s previous GPUs were fitted with limiters that couldn’t be hacked in a bid to make them less desirable to crypto miners, The Verge reported this week. But notably the crypto firms found ways around the restrictions.

The semiconductor giant insisted that situation isn’t going to be repeated. “The A800 meets the US government’s clear test for reduced export control and cannot be programmed to exceed it,” Nvidia reassured in a statement on Monday.

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