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Chinese chip designers slow down processors to dodge US sanctions

A snail on a CPU

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Alibaba and start-up Biren Technology are tweaking their most advanced chip designs to reduce processing speeds and avoid US-imposed sanctions aimed at suppressing Chinese computing power.

Alibaba, Biren, and other Chinese design houses have spent years and millions of dollars creating the blueprints for advanced processors to power the country’s next generation of supercomputers, artificial intelligence algorithms and data centers. These are produced offshore by the world’s biggest contract chipmaker, Taiwan Semiconductor Manufacturing.

But sanctions announced by Washington last month that cap the processing power of any semiconductor shipped into China without a license have thrown a wrench into their ambitions.

Both Alibaba and Biren had already conducted expensive test runs of their latest chips at TSMC when Washington unveiled the controls. The rules have forced the companies to halt further production and make changes to their designs, according to six people briefed on the situation.

They mark another blow for Alibaba, the tech group founded by billionaire Jack Ma. Its shares have lost 80 percent of their value since Beijing canceled sister group Ant’s initial public offering two years ago. The group’s new chip was to be its first graphics processing unit and was close to being unveiled, according to three people close to the matter.

The US export controls extend to third-country chip manufacturers because almost all semiconductor fabrication plants use American components or software, meaning the rules may amount to an embargo on all high-end processors entering China. Washington earlier restricted such imports from California chip companies Nvidia and AMD.

Meanwhile, China’s own domestic chip plants are possibly decades away from producing cutting-edge chips such as those designed by Alibaba and Biren.

Analysts said Washington’s sanctions, of which the high-end processor restrictions are one part, aimed to forcibly slow China’s tech sector development.

“Attempting to freeze a country in place for a technological level of hardware is a big deal,” said Paul Triolo, head of tech policy at consulting group ASG. “That is what the US is trying to do by restricting sales and closing off the manufacturing road map to get to these advanced levels of hardware.”

Triolo said high-end processors were the building blocks for research into supercomputing and AI, which power everything from autonomous driving to drug discovery. “If Commerce doesn’t give out licenses then China has a real problem,” he said.

However, the US Department of Commerce was unlikely to grant such licenses, said Kevin Wolf, an expert on export controls at Akin Gump. “This part of the rule states that such applications will be ‘presumptively denied,’” he said.

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