U.S. Has Sanctioned AI Chips To China, But It May Backfire

It has been more than a year now since the U.S. government has put restrictions in the access of Chinese entities to high-performance AI hardware. However, there appears toe be enough AI processors in China to build the world's most powerful training cluster.

According to the reports of SemiAnalysis, Huawei, which is probably the most sanctioned company in the IT sector, has not only circumvented U.S. sanctions by using proxies, but it produces plenty of its own Ascend 910-series processors domestically.

It has become obvious that Nvidia's highest-end AI and HPC GPUs like the H100 and H200 are being smuggled into China from other countries, including India, Malaysia, and Singapore. As a result, entities that need to build a server or even a rack powered by Nvidia's Hopper GPUs can do so, albeit at a premium price.

Another method of acquiring the GPUs is acquire Nvidia's cut-down DGX H20 processors aimed at China and shipped to the country without restrictions.

SemiAnalysis estimates that Nvidia will officially sell 900,000 HGX H20 processors to China this year alone, and will then supply over a million B20 processors to the country in 2025. How many 're-exported' H100/H200 processors will end up in China is unknown, but the analysts believe that 'many' will make it into the country. Chinese companies would of course like to have more of Nvidia's high-end AI processors, but they can also access them in the cloud.

Huawei may not be exactly interested in getting Nvidia's hardware, as it has its own Ascend 900-series hardware platform for AI. The company's Ascend 910 processor was originally made by TSMC (and it looks like eventually Huawei managed to continue making the compute chiplet of this design at TSMC via a proxy), and it also has the Ascend 910B made by SMIC using its N+2 manufacturing technology (7nm-class), along with the Ascend 910C made on SMIC's N+3 fabrication technology (6nm-class).

How can SMIC keep producing chips on advanced process technologies two years after the U.S. imposed tight restrictions on sales of advanced wafer fab tools to China's most advanced fabs?

The reports suggest that the restrictions curbs are easily circumvented by formally supplying sophisticated wafer fab equipment to fabs that are not restricted. SMIC, for example, has an unrestricted legacy fab and a restricted advanced logic fab interconnected by a wafer bridge that enables wafers to travel back and forth, essentially making the two fabs into a single facility. This setup enables one fab to continue producing advanced chips for AI applications, like the Kirin 9000S and Ascend 910B, while the other fab, classified as a legacy fab, can legally import advanced tools.