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May 31, 2024, 5:32pm EDT
securitytechbusinessEast Asia
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Semafor Signals

US faces a China conundrum in chip licensing restrictions

Insights from China Talk, Forbes, and Yonhap

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China-US chip trade war
REUTERS/Florence Lo
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The News

Washington is concerned that China could be circumventing export controls and accessing US chip technology via US allies.

Washington has delayed the approval of AI chip exports to the Middle East by chipmakers Nvidia and Advanced Micro Devices, Bloomberg reported Thursday, partly over concerns that Chinese companies could get their hands on the chips through data centers in the Middle East.

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The US Commerce Department is also investigating whether a South Korean chipmaker, Ronda Korea, is selling technology to Chinese firms sanctioned by Washington, according to The Information.

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SIGNALS

Semafor Signals: Global insights on today's biggest stories.

Middle East eyes China for post-oil economy

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Sources:  
China Talk, Financial Times

China has become one of the Middle East’s most important partners in helping the Gulf transition away from its oil-dependent economy, with Chinese AI firms looking to the region as a new tech hub, according to the China Talk substack. US-sanctioned Chinese tech giant Huawei, for instance, is building an AI data center in Riyadh, promising a more than $400 million investment in Saudi Arabia’s cloud sector over the next five years. Chinese researchers and students are also flooding Middle East universities focusing on AI, which some see as Beijing’s way to skirt US chip sanctions and access advanced semiconductors, China Talk wrote. Two universities in Saudi Arabia and the UAE, have ordered more than 3,000 NVIDIA chips for AI research, according to the Financial Times.

Licensing restrictions pose a China ‘dilemma’ for Washington

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Source:  
Forbes

Beijing this week announced a $47.5 billion fund for semiconductor research and development, presenting Washington with a “difficult dilemma,” Forbes wrote. Currently, Washington thinks that the best preventative measure is through licensing restrictions to stop its allies from giving China access to American chips. But containing China also “runs the risk of incentivizing Chinese domestic production and technological autarky even further,” Forbes argued. The main concern is that Chinese chip advancements and production could ultimately surpass Taiwan’s chip capabilities, which would diminish the island’s “utility” as a strategic and security asset.

US-China chip war puts South Korea at risk

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Sources:  
Korean Institute for International Economic Policy, Dong-a Ilbo, Yonhap, Reuters

The International Monetary Fund has warned that South Korea would likely be the “biggest victim” of US firms working to de-risk from China, the Dong-a Ilbo newspaper reported last year. South Korea is militarily aligned with the US, but its economy is highly dependent on China: It is the largest exporter of memory chips to China, and ranks only behind Japan for silicon wafers, according to the Korean Institute for International Economic Policy. That is why South Korean President Yoon Suk Yeol is “very cautious” about cooperating with Washington’s export controls, according to Yonhap news agency. The government this month made a $19 billion investment to boost domestic chip production capacity, which Yoon championed as a way for Seoul to remain strategically independent amid the chip “warfare.”

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