Applied Materials Inc

Latest story

150 Shares129 Views

Biden Administration Weighs Further Curbs on Sales of A.I. Chips to China

by

Reports that the White House may clamp down on sales of semiconductors that power artificial intelligence capabilities sent tech stocks diving.The Biden administration is weighing additional curbs on China’s ability to access critical technology, including restricting the sale of high-end chips used to power artificial intelligence, according to five people familiar with the deliberations.The curbs would clamp down on the sales to China of advanced chips made by companies like Nvidia and Advanced Micro Devices and Intel, which are needed for the data centers that power artificial intelligence.Biden officials have said that China’s artificial intelligence capabilities could pose a national security threat to the United States by enhancing Beijing’s military and security apparatus. Among the concerns is the use of A.I. in guiding weapons, carrying out cyber warfare and powering facial recognition systems used to track dissidents and minorities.But such curbs would be a blow to semiconductor manufacturers, including those in the United States, who still generate much of their revenue in China.The deliberations were earlier reported by The Wall Street Journal. Nvidia’s shares closed down 1.8 percent on Wednesday after reports of the potential export crackdown. The company has been one of the primary beneficiaries of the enthusiasm over artificial intelligence, with its share price surging by roughly 180 percent this year.Such additional restrictions, if adopted, would not have an immediate impact on Nvidia’s financial results, Colette Kress, the chief financial officer of Nvidia, said Wednesday at an event hosted by an investment firm. But over the long term, they “will result in a permanent loss of opportunities for the U.S. industry to compete and lead in one of the world’s largest markets,” she said. She added that China typically generates 20 percent to 25 percent of the company’s data center revenue, which includes other products in addition to chips that enable A.I.The stock prices of chip companies Qualcomm and Intel fell less than 2 percent on Wednesday while AMD nudged 0.2 percent lower.Intel declined to comment, as did the Commerce Department, which oversees export controls. AMD did not respond to a request for comment.Curbing the sale of high-end chips would be the latest step in the Biden administration’s campaign to starve China of advanced technology that is needed to power everything from self-driving cars to robotics.Last October, the administration issued sweeping restrictions on the types of advanced semiconductors and chip making machinery that could be sent to China. The rules were applied across the industry, but they had particularly strong consequences for Nvidia. The company, an industry leader, was barred from selling China its top-line A100 and H100 chips — which are adept at running the many processes required to build artificial intelligence — unless it first obtained a special license.In response to those restrictions, Nvidia began offering the downgraded A800 and H800 chips in China last year.The additional restrictions under consideration, which would come as part of the process of finalizing those earlier rules, would also bar sales of Nvidia’s A800 and H800 chips, and similar advanced chips from competitors like AMD and Intel, unless those companies obtained a license from the Commerce Department to continue shipping to the country.The deliberations have touched off an intense lobbying battle, with Intel and Nvidia working to prevent further curbs on their business.Chip companies say cutting them off from a major market like China will substantially eat into their revenues and reduce their ability to spend on research and innovation of new chips. In an interview with The Financial Times last month, Nvidia’s chief executive, Jensen Huang, warned that the U.S. tech industry was at risk of “enormous damage” if it were to be cut off from trading with China.The Biden administration has also been internally debating where to draw the line on chip sales to China. Their goal is to limit technological capacity that could aid the Chinese military in guiding weapons, developing autonomous drones, carrying out cyber warfare and powering surveillance systems, while minimizing the impact such rules would have on private companies.The measure, which would come as the United States is also considering expanded curbs on U.S. investment in Chinese technology firms, is also likely to ruffle the Chinese government. Biden officials have been working in recent weeks to improve bilateral relations after a fallout with Beijing this year, after a Chinese surveillance balloon flew over the United States.Antony J. Blinken, the secretary of state, traveled to Beijing this month to meet with his counterparts, and Treasury Secretary Janet L. Yellen is also expected to travel to China soon.During a Wednesday appearance at the Council on Foreign Relations in New York, Mr. Blinken said that China’s concern that the U.S. sought to slow its economic growth was “a lengthy part of the conversation that we just had in Beijing.”Chinese officials, he said, believe the U.S. seeks “to hold them back, globally, and economically.” But he disputed that notion.“How is it in our interest to allow them to get technology that they may turn around and use against us?” he asked, citing China’s expanding nuclear weapons program, its development of hypersonic missiles and its use of artificial intelligence “potentially for repressive purposes.”“If they were in our shoes, they would do exactly the same thing,” he said, adding that the U.S. was imposing “very targeted, very narrowly defined controls.”Nvidia’s valuation had soared in light of the recent boom in generative artificial intelligence services, which can produce complex written answers to questions and images based on a single prompt. Microsoft has teamed up with OpenAI, which makes the chatbot ChatGPT, to generate results in its Bing search engine while Google has built a competing chatbot called Bard.As companies race to incorporate the technology into their products, it has increased demand for chips like Nvidia’s that can handle that the complex computing tasks. That momentum has helped to push Nvidia’s market capitalization past $1 trillion, making the company the world’s sixth largest by value.Nvidia said in an August filing that $400 million in revenue from “potential sales to China” could be subject to U.S. export restrictions, including sales of the A100, if “customers do not want to purchase the company’s alternative product offerings” or the government failed to grant licenses to allow the company to continue to sell the chip inside China.Since the restrictions were imposed, Chinese chip makers have been trying to overhaul their supply chains and develop domestic sources of advanced chips, but China’s capabilities to produce the most advanced chips remains many years behind that of the United States.Dan Wang, a visiting scholar at Yale Law School, said that the impact of advanced chip restrictions on Chinese tech companies was uncertain.“Most of their business needs are driven by less advanced chips, as fewer of them are playing on the fringes of the most advanced A.I.,” he said.Joe Rennison More

More stories

  • 113 Shares99 Views

    in Economy

    Silicon Valley Chosen for $4 Billion Chip Research Center

    by

    Anticipating federal subsidies, Applied Materials said it planned to invest up to $4 billion in the semiconductor project in Sunnyvale, Calif.Silicon Valley got its name from computer chips, but no longer plays a central role in shaping how they are made. A major supplier to the industry hopes to change that.Applied Materials, the biggest maker of machines for producing semiconductors, said on Monday that it planned to build a massive research facility near its hometown, Santa Clara, Calif., to allow chip makers and universities to collaborate on advances to make more powerful chips. Silicon Valley hasn’t seen a comparable semiconductor construction project in more than 30 years, industry analysts say.The company expects to invest up to $4 billion in the project over seven years, with a portion of that money coming from federal subsidies, while creating up to 2,000 engineering jobs.The plan is the latest in a string of chip-related projects spurred by the CHIPs Act, a $52 billion package of subsidies that Congress passed last year to reduce U.S. dependence on Asian factories for the critical components. What sets Applied Materials’ move apart is that it focuses on research, rather than manufacturing, and is a substantial new commitment to the industry’s original hub.Chip makers that grew up in Silicon Valley have long chosen to build new “fabs,” the sophisticated factories that fabricate chips from silicon wafers, in less costly states and countries. But Applied Materials is betting that technical talent at nearby universities and the local companies that design chips will spur innovation quickly, making up for cost differences with other locations.“You can connect more leaders in this ecosystem here than anyplace in the world,” said Gary Dickerson, the chief executive of Applied Materials. “There’s no place like this.”Applied Materials has scheduled an event on Monday in Sunnyvale, Calif., to discuss the project, with expected guests including Vice President Kamala Harris.Politicians from both parties overwhelmingly supported the CHIPs Act, partly out of fears that China will one day exert control over Taiwan and factories there that produce the most advanced chips. Besides encouraging domestic chip manufacturing, the legislation allocated about $11 billion to spur related research and development.Chip research now takes place in several phases in multiple locations, including university labs and collaborative centers such as the Albany NanoTech Complex in New York. Applied Materials participates with other companies in that center and operates a research fab in Silicon Valley where chip makers can work with its machines and those of other toolmakers.But many of the core chores in developing new production processes are carried out by chip manufacturers in fabs outfitted with a broad array of equipment. The proposed center, which Applied Materials calls Epic, is set to have ultraclean production space bigger than three football fields and is designed to give university researchers and other engineers comparable resources to experiment with new materials and techniques for creating advanced chips.One goal is to reduce the time it takes for new ideas to flow from the research labs to companies designing new manufacturing gear, information that is now often delayed as it is filtered through the chip makers.“The trouble is, those customers need time to figure out what they need,” said H.-S. Philip Wong, a Stanford professor of electrical engineering who was briefed on the company’s plans. “There is a big hole in there.”Applied Materials also said chip makers would be able to reserve space in the center and try out new tools before they were commercially available.The plan hinges partly on whether Applied Materials can win subsidies under the CHIPs Act, which the Commerce Department says has already attracted expressions of interest from more than 300 companies. Mr. Dickerson said that the company planned to build the center in any case, but that government funding could affect the project’s scale.Assuming the center evolves as planned, it could substantially bolster Silicon Valley’s role in the evolution of chips, said G. Dan Hutcheson, vice chair at the market research firm TechInsights.“It really is a vote of confidence for the Valley,” he said. More

  • 113 Shares179 Views

    in Economy

    Chip Makers, Once in High Demand, Confront Sudden Challenges

    by

    Demand for semiconductors was off the charts last year. But a sharp slowdown coupled with new U.S. restrictions against China have created obstacles.A few months ago, makers of computer chips seemed on top of the world.Customers could not get enough of the small slices of silicon, which act as the brains of computers and are needed in just about every device with an on-off switch. Demand was so strong — and U.S. dependence on a foreign manufacturer so worrying — that Democrats and Republicans agreed in July on a $52 billion subsidy package that included grants to build new chip factories in America.U.S. chip makers such as Intel, Micron Technology, Texas Instruments and GlobalFoundries pledged huge expansions in domestic manufacturing, betting on a growing need for their products and the prospects of federal subsidies.But lately, supplies of some semiconductors are piling up, which could spell good news for consumers but not for industry executives. Their bold investment plans are running into a sudden and unexpected slowdown in consumer demand for electronic gadgets, new U.S. restrictions on sales to customers in China, rising inflation and the unusual prospect of a simultaneous shortage of some chips and glut of others.That has left chip makers, which had been looking ahead to immense demand and opportunity, suddenly grappling with immense challenges. Many of the companies now face complex questions about whether and when to boost production, amid uncertainty about how long the current sales slowdown may last.“Six months ago, I would have said we were in this hypergrowth phase,” Rene Haas, chief executive of Arm, the British company whose chip technology powers billions of smartphones, said of the broader industry. Now, he said, “we’re in a pause.”For many consumers, products that were scarce because of a chips shortage may start becoming more available, though not immediately. Automakers, which have struggled to make enough cars with the lack of chips and other components, said they were getting more but still face some problems. Prices of smartphones and computers could also fall as chip supplies grow and prices plummet for two types of memory chips they use.But for now, not everyone is able to get all the chips they need, and prices remain high for many kinds of semiconductors. “We are still way above prepandemic pricing,” said Frank Cavallaro, chief executive of A2 Global Electronics and Solutions, a chip distributor.Fears of a slump, which have clobbered semiconductor stocks this year, are evident in recent earnings announcements from chip makers. South Korea’s SK Hynix on Wednesday reported a 20 percent drop in revenue and said its business of memory chips “is facing an unprecedented deterioration in market conditions.” Intel provided more evidence of a downturn in its third-quarter results on Thursday, including a 20 percent drop in revenue and a $664 million charge to cover cost-cutting measures expected to include job cuts.The Biden administration delivered its own blow this month with sweeping restrictions aimed at hobbling China from using U.S. technology related to chips. The measures restrict sales of some advanced chips to Chinese customers and prevent U.S. companies from helping China develop some kinds of chips.That hurts semiconductor companies like Nvidia, which makes graphics chips used to run A.I. applications in China and elsewhere. The Silicon Valley company, already suffering from a sharp sales decline for video game applications, recently estimated that the U.S. restrictions would probably reduce revenues in its current quarter by about $400 million.The sanctions may bite even harder at companies that sell chip-making equipment, which relied heavily in recent years on sales to Chinese factories.Lam Research, which produces tools that etch silicon wafers to make chips, estimated that the China limitations would reduce its 2023 revenue by $2 billion to $2.5 billion. “We lost some very profitable customers in the China region, and that’s going to persist,” Doug Bettinger, Lam’s chief financial officer, said during an earnings call last week.Applied Materials, the biggest maker of chip manufacturing tools, also said sales would suffer because of the restrictions. On Wednesday, another maker of chip manufacturing tools, KLA, said its revenue next year was likely to shrink by $600 million to $900 million as it reduces equipment sales and services to some customers in China.Worries about foreign competition are nothing new in semiconductors, an industry known for boom-and-bust cycles. But it has rarely faced a player as potent as the Taiwan Semiconductor Manufacturing Company, whose factories on the island churn out chips designed by companies including Apple, Amazon, Nvidia and Qualcomm.China claims Taiwan as its own territory, creating a potential risk to chip supplies. That helped drive the recent bipartisan support for the U.S. chip legislation, which was heavily pushed by President Biden.President Biden trekked to Albany, Ohio, last month for the ground breaking of a $20 billion Intel manufacturing campus. Pete Marovich for The New York TimesHe trekked to Ohio last month for the ground breaking of a $20 billion Intel manufacturing campus. On Thursday, President Biden visited a site near Syracuse, N.Y., where Micron has vowed to spend as much as $100 billion over 20 years on a large complex to build memory chips, a project he called “one of the most significant investments in American history.”Those plants will be needed at some point, industry executives said. But they are now grappling with the sudden and sharp decline in chip demand. The problem is particularly acute in processors and memory chips, which perform calculations and store data in personal computers, tablets, smartphones and other devices.Those products were hot commodities as consumers worked from home during the coronavirus pandemic. But that boom has now cooled, with PC sales dropping 15 percent in the third quarter, according to estimates by International Data Corporation. The research firm also predicted that smartphone sales would fall 6.5 percent this year. Demand has been tempered by inflation as well as a lengthy Covid lockdown in China, analysts said.At the same time, inventories of chips piled up. Computer makers spooked by the shortage bought more components than they ended up needing, said Dan Hutcheson, a market researcher at the firm TechInsights. When customer demand dried up, they started slashing orders.“You see multiple issues converging,” said Syed Alam, who leads Accenture’s global high tech consulting practice, including semiconductors.Handel Jones, chief executive at International Business Strategies, predicts that total sales for the chip industry will still grow 9.5 percent this year. But he expects revenue to decline 3.4 percent to $584.5 billion next year. Last year, he had predicted steady yearly growth for the chip industry from 2022 until 2030.Warning signs included Intel’s second-quarter results, which it announced in July. The company posted a rare loss and a 22 percent drop in revenue, blaming its own missteps and customers who cut chip inventories.At Micron, the mood also changed quickly. In May, the company gave bullish presentations at an investor event in San Francisco about long-term demand for its memory chips. By the next month, it was warning of slowing demand and falling chip prices.In September, the company reported a 20 percent drop in fourth-quarter revenue. It also slashed planned spending on factories and equipment by nearly 50 percent in the current fiscal year.The swing in demand might seem to undercut Micron’s widely publicized expansion plans, which include the Syracuse complex and a new $15 billion factory in Boise. But chip manufacturers often juggle different time schedules. Since new factories take roughly three years to complete, waiting too long to build can leave them short-handed when sales rebound.“The long-term outlook for memory and storage is robust,” said Mark Murphy, Micron’s executive vice president and chief financial officer. The cuts in near-term capital spending, he added, are a needed response “to bring our supply in line with demand.”Intel’s situation is even more complex. The company has major factory expansions underway in Arizona, Oregon, New Mexico, Ireland and Israel, in addition to the new manufacturing campus in Ohio and one planned for Germany. Intel is also determined to start competing with T.S.M.C. in manufacturing for other companies, as well as making chips it designs.The Taiwan Semiconductor Manufacturing Company is a potent player in semiconductors, with factories that churn out chips designed by companies including Apple, Amazon and Qualcomm.An Rong Xu for The New York TimesIntel now plans to construct factory buildings while holding off on purchases of the costly machines inside them, which are a much bigger expense.Those purchases can be tailored to emerging demand for particular kinds of chips, said Keyvan Esfarjani, Intel’s executive vice president who oversees construction and operation of its factories. He said the long-term need to reduce U.S. and European dependence on chips made in Asia was too important to be halted by short-term business cycles.“This is beyond Intel,” Mr. Esfarjani said in an interview last month. “This is important for people, for communities, for the United States. It’s important for national security.” More