My Take | Washington has already lost dirty chip war but does not know it yet
Selling China subpar chips will not make it dependent on the United States but instead spur it to produce more and better ones
The United States is fighting two chip wars against China. One involves playing dirty, which it has already lost, though it doesn’t know it yet. The other, more legitimate, remains to be seen.
It depends on whether America can maintain its longstanding tech innovation and leadership. But with Donald Trump at the helm with his weird and often incomprehensible “strategies” – from cuts and firings in government-funded basic research to direct interference in the tech sector – things don’t look good.
The dirty chip war essentially tries to trip China over with export restrictions, bullying of allies from selling advanced tech, and sanctioning of Chinese tech firms, which often includes targeting their non-Chinese suppliers as well. It was started by Donald Trump 1.0, intensified under Joe Biden, but now somewhat moderated under Trump 2.0.
You can say China also has its own tit-for-tat dirty war, which involves smuggling and copying of export-restricted advanced chips and related tech such as automated software designs. But historically, rising tech superpowers, including Britain and the US, have always taken from others as a kind of state industrial policy. China’s development is the rule, not the exception. Tech diffusion can be slowed but never stopped.
At the moment, there is something of a truce, though Washington clearly sees it as a continuation of the tech war by other means.
There seems to be a consensus within the Trump White House that putting the squeeze on China has actually made it move faster to refashion its entire chipmaking industry by creating an increasingly self-sufficient domestic sector with its own secure supply chains.
That’s why Trump and Co have switched to a different track, by allowing Nvidia and AMD to sell to China respectively their lower-performance chips H20 and MI308 for artificial intelligence.
US Treasury Secretary Scott Bessent claims the new strategy is working. “They are worried about the Nvidia chips becoming the standard in China,” he said. “We do not want the standard to become Chinese across the world, or even in China.”
As usual, the devil is in the details. If you are a drug dealer, you want to hook your clients on heroin, not methadone. Subpar chips like H20 and MI308 are the tech equivalent of methadone.
Consider the performance of H20 as measured by two key metrics: tera floating-point operations per second (Tflops) for computing power and terabits per second (Tbps) for memory bandwidth.
Huawei’s Ascend 910C already runs at 780 Tflops and 3.2 Tbps while Nvidia’s H20 operates at a turtle’s pace of 148 Tflops, though its bandwidth is still slightly higher, at 4 Tbps. Meanwhile, Nvidia’s more advanced chips – denied to China – are GB200 at 2,500 Tflops and 8 Tbps; and H100 at 989 Tflops and 3.35 Tbps.
Clearly, Nvidia’s H20 holds little attraction in terms of its technology, though Chinese firms may still want it because of its availability. That’s why Beijing is asking domestic firms to justify its use rather than domestic chips.
Chipmakers such as Semiconductor Manufacturing International Corporation (SMIC) have been increasing production to meet demand. But China does have a short-term problem: it has developed its own advanced chips but doesn’t produce enough of them.
“We don’t sell them our best stuff, not our second-best stuff, not even our third best,” US Commerce Secretary Howard Lutnick said.
“We want to keep having the Chinese using the American technology stack, because they still rely upon it. You want to sell the Chinese enough that their developers get addicted to the American technology stack. That’s the thinking.”
A dealer who tries to hook his clients with the least, not the most, potent drugs is bound to go out of business. H20 and MI308 will end up serving as a stopgap for China until SMIC and others can scale up production of Ascend and other powerful chips.
They may turn out to be a help, not a hindrance.