#71 -- NVIDIA H20 -- China Chip Dependency or China's Master Strategic Move
Hybrid Systems Rule the World
Upon landing in China in 2005, a mentor recommended a book to help acclimate to the local business culture. That book was Mr. China by Tim Clissold. It describes many business stories of Joint Ventures gone rouge at the expense of foreign companies trying to hit the lottery in the middle kingdom. #qingdaobeer #budweiser
Fast forward to 2016. SoftBank Group International buys ARM Holdings (Advanced RISC Machines), a UK based company, to accelerate it's master plan at global digital transformation thru AI/ML, IoT, Robotics, etc....cool stuff....the future is here!
(Microchip’s architectures determine speed, power and types of tasks for our electronics…..the brain. Specialized chips = specialized functionality)
In 2018, ARM China was established as a JV to attract multiple pools of "money and talent" which gives Chinese state owned investors a majority stake and provides sole distribution of ARM IP inside of China. In 2020, the CEO of ARM China, Allen Wu, was voted out by the board for having a competing side business fund called Alphatecture. Wu refused to step down, retained physical control of the company's official seal ("chop")—a critical legal tool in China for authorizing documents and business decisions. He refused to go, kept the chop, hired guards, and ran the company semi-independently, escalating to lawsuits. He was fully ousted by mid-2022, with ARM regaining control via new leadership and a government-approved seal. After his ousting from ARM China in 2022, Allen Wu founded a new semiconductor startup called Zhongzhi Chip (officially Zhongzhi Qixin (Shanghai) Technology Co. Ltd., which also operates under the name CoreLab Technologies). The startup is backed by "abundant resources" and competent shareholders, and Wu has been focused on recruiting talent, including former ARM employees and RISC-V specialists, to build out the team.
(RISC-V architecture is open-source instruction set architecture(ISA) and is royalty free which allows Chinese firms to avoid the fees and export restrictions)
Zhongzhi Chip is developing RISC-V processor IP (intellectual property cores), computing platforms, high-performance real-time processors, and vector extensions for machine learning/AI applications. There is speculation that Zhongzhi could act as a China representative for Tenstorrent, a U.S.-Canadian AI chip startup and NVIDIA competitor using open RISC-V architecture.
Which brings us to the lifting of the ban for H20 NVIDIA GPU…..
Current Chinese tech companies like Alibaba and Huawei continue to develop chips which leverage ARM IP(proprietary) and RISC-V(open). The NVIDIA GPU ban drove the Chinese tech firms to accelerate development of custom AI chips which leverage RISC-V. In essence, they are designing and developing chip independencies with open source architecture.
China's use of H20 could complement ARM China-licensed chips in hybrid systems, accelerating AI without full dependence on U.S. exports. ARM China's autonomy—developing proprietary IP like Linglong GPUs—further reduces the sanction's leverage, as it supports China's shift away from Western tech.
WORKING THE SYSTEMS — Stock Exchange, Legal Structures, Closed Systems
Share Transfer for IPO (2022–2023): To facilitate ARM’s 2023 Nasdaq IPO, ARM transferred its 47.3% stake in Arm China to a SoftBank-controlled special purpose vehicle, reducing its direct ownership to under 20% for accounting purposes. This allowed ARM to collect licensing fees without disclosing Arm China’s financials, resolving IPO-related issues. However, China’s regulators delayed processing the transfer, reflecting concerns about losing influence over ARM’s technology amid U.S.-China chip tensions
https://www.cnbc.com/2022/03/30/arm-to-transfer-shares-of-arm-china-to-softbank-ahead-of-ipo.html
Bypassing Arm China: In October 2024, reports emerged that ARM is exploring direct IP licensing to Chinese customers, bypassing Arm China. This move aims to reduce reliance on the joint venture, which operates independently and develops its own IP, such as the Linglong D8/D6/D2 graphics processors and V510/V710 video processors. Arm China’s push for self-reliance, including chiplet and GPU development for AI and HPC, aligns with China’s goal of semiconductor independence, potentially competing with ARM’s core https://www.digitimes.com/news/a20241017PD200/arm-business-ip-licensing-revenue.html
THE WHY YOU SHOULD CARE
The future is based on hybrid chip processing technology which either combines ARM + RISC-V architectures or ARM/RISC-V CPU(Central Processing Unit) + GPU + (Graphic Processing Unit) + AI cores. These hybrid combinations will revolutionize everything from medicine discovery to hypersonic missiles.
Historically western technology firms have led the design and development. The new designs from China will fracture the global supply chains and tip the power scales. Chip dependency will no longer control China. A new game begins with the west. Just like energy and food drive competitive priorities, technology and it’s supply chain will shift economies, refocus alignments and shine light on competition.
Hybrid chips will supercharge China’s AI priorities. Sanctions forced the adaptation of domestic chips. The ban of anything creates a Whack A Mole reaction for western governments and companies resulting in a gray market for opportunistic countries, organizations and individuals. Since China has “flexible laws”, this plays to their favor to attract companies and channel partners who are coin operated.
Will there be enough time to shift back the supply chains to support national interests?
Will a lack of China chip dependency invigorate the forced reintegration of Taiwan?
Will a controlling US GOV stake in MP Materials be enough? Or was it just a buyout of Chinese interest in the company?
It will take the WHOLE OF NATION to compete for the future…..
Corporate America/Private Capital will need to invest in their own nation
50 states = 50 engines
Government will need to enforce policies which protect/grow the national assets
50 states = 50 engines
Universities will need to teach the people practical and technical skillsets
50 states = 50 engines
The definition of insanity is doing the same thing over and over expecting a different result….
God Bless America
Tyler
