SINGAPORE: Gaming hardware company Razer said on Monday (Jul 10) that it is investigating a potential hack that affected its digital wallet Razer Gold, which customers use to purchase games and in-game content. This comes about three years after Razer suffered a cybersecurity breach that led to the personal information,Continue Reading
Here are three inconvenient truths. First, the world cannot fight climate change without developing countries. Second, developing countries will need massive amounts of investment for climate financing — and much of these required savings will need to be imported.
Third, the governments of developing countries won’t allow the import of foreign savings if they worry that a backlash from international financial markets might cause financial instability.
The combination of these three truths has produced a predicament that the world has not yet grappled with – that action on climate change is inextricably linked to the financial stability of developing countries, both perceived and actual.
This is a big problem. Estimates of how much investment will be required by developing countries to fight climate change over the coming decades are in the tens of trillions of dollars.
But developing countries, particularly those in East Asia, lack sufficient domestic savings given the massive amounts of investment already needed to reduce poverty and develop their economies, meaning they typically run current account deficits — where a country imports savings from overseas.
These current account deficits can often be a source of financial volatility. When an international shock occurs, countries with a current account deficit greater than 3% of GDP tend to be punished by the market with capital outflows, hurting the financial sector and the exchange rate.
The last few years have been a case in point. As US interest rates have risen, capital has been sharply withdrawn from developing countries and shifted to the United States to enjoy higher returns.
This has caused a sudden tightening of financial conditions in developing countries and pushed down their exchange rates against the US dollar, making their foreign-denominated debts larger and, in some instances like Bangladesh, requiring IMF assistance. The same turbulence was experienced during the taper tantrum in 2013 and the global financial crisis in 2008.
Recent estimates suggest that if developing countries were to import the necessary foreign savings to fight climate change, their current account deficits could increase substantially. This is a terrifying thought for developing country finance ministers who have become hypersensitive to growing current account deficits.
The result is that policymakers limit financial inflows using monetary policy and macroprudential tools to keep the current account deficit in check, constraining economic growth — and in the process, constraining the sustainable investment needed to fight climate change.
To be sure, recent international turbulence has revealed that developing countries, particularly in Asia, have come a long way in bolstering the resilience of their financial systems.
Decades of reform have strengthened risk monitoring frameworks, hedged risks, liberalized exchange rates, deepened financial systems, strengthened supervisory mechanisms and improved resolution processes for troubled banks and financial institutions.
Not all developing countries face the same challenges, and not all developing countries have the same contribution to climate risks. And there is only so much developing countries can do. While recent crises have revealed how far developing countries have come, they’ve also shown their continued susceptibility to global shocks.
If developing countries are to import the foreign savings needed to fight climate change, the rich world and the institutions it controls will need to work with them to reduce financial instability.
Luckily, there are practical things that can be done. At the global level, efforts to reform the lending conditions of the International Monetary Fund need to be continued, to reduce the stigma which stops developing countries from seeking assistance.
Development banks, like the Asian Development Bank at the regional level and the World Bank at the global level, can provide finance directly through concessional lending and grants to ease the financing burdens of developing countries.
An emerging deal between China and the World Bank will likely see China agree to reschedule some of its loans to developing countries where, in return, the World Bank will increase its lending to developing countries, including for climate action.
The COP27 agreement to loan Indonesia US$20 billion will also help. But given that the size of the green investment required dwarfs the resources of these institutions, development banks will need to be more innovative and use their balance sheets to help backstop the liquidity of developing country governments as they undertake sustainable investments.
Bilaterally, rich world central banks need to use currency swap lines and standby loans to plug the gaps in the safety net and ensure that all developing countries have access to foreign exchange in times of need.
And international institutions need to support developing countries by implementing the tools and mechanisms that the countries need domestically to manage risks from capital inflows.
These tools and mechanisms can also help them to price carbon domestically as part of a global approach and implement domestic regulatory reforms to fight climate change, including the elimination of fossil fuel subsidies.
In a nutshell, climate change is a global challenge that will be won or lost in developing countries. All countries have a shared incentive to ensure the necessary investments are undertaken in developing countries — and that means all countries have a shared incentive to bolster the financial stability of developing countries.
If the last two years have shown us anything, it’s that we have a long way to go.
M Chatib Basri teaches in the Economics Department at the University of Indonesia and was formerly Indonesia’s Minister of Finance.
Adam Triggs is Partner at Mandala and Non-Resident Fellow at the Brookings Institution and the Crawford School of Public Policy, The Australian National University.
This article was originally published by East Asia Forum and is republished under a Creative Commons license.
Aims to bridge gap between traditional banking & Asia’s unbanked
Plans to expand across Asia via Visa’s cross-border capabilities, network
Paywatch, an Earned Wage Access (EWA) startup based in Malaysia, announced last week an MoU with Visa to promote financial inclusion among Asia’s workforce. In a statement, the firm said it aims to…Continue Reading
TAIPEI: Paraguay’s president-elect, Santiago Pena, will visit Taiwan this week and meet “great friend” President Tsai Ing-wen, he said on Sunday (Jul 9), shoring up a relationship at a time China is working to entice the island’s dwindling allies. Paraguay is the last South American country with formal relations withContinue Reading
BEIJING: It is “critical” for Washington and Beijing to keep working together on climate finance, US Treasury Secretary Janet Yellen said Saturday (Jul 7), urging deeper cooperation in addressing the “existential threat” of global warming. Yellen is on a four-day trip to Beijing, as the United States seeks to coolContinue Reading
TOKYO: It would be easy to assume that not much has changed since Shinzo Abe, Japan’s longest-serving prime minister and de facto senior statesman, was assassinated in broad daylight one year ago.
But there’s an evolution underway, and Japan is moving closer to the nation Abe aspired to when he was gunned down on the campaign trail for upper house elections on Jul 8, 2022. The language of decline, of a country whose time has passed, is gone: From think tanks to hedge funds, Japan is on everyone’s lips. Tokyo is at the heart of Washington’s strategy to “de-risk” from China.
Money is flowing into the markets, led by Warren Buffett. And tourists are flocking back, with more Americans coming now than before the pandemic.
Abe aimed to build a Japan that could cast off the shackles of its wartime guilt and assume a position on the geopolitical stage befitting its economic might.
The former prime minister laid out not just how his nation should position itself against China, but created the model that now dominates Western thinking toward Beijing. He spearheaded the concept of the “free and open Indo-Pacific,” later adopted by the United States, outlining this coalition of like-minded nations as far back as 2007.
The current prime minister, Fumio Kishida, has taken that ball and is running with it, with his plan to radically overhaul Japan’s military spending, a move that has vociferous US support. The country is taking steps to shore up its weakened defense industry and is looking to relax a long-standing ban on the export of weapons in a bid to add additional support for Ukraine.
The launch of social media app Threads as a competitor to Twitter is a game-changer.
Meta, which also owns Facebook and Instagram, launched the new platform yesterday, ahead of schedule. Threads was welcomed almost immediately – especially by hordes of Twitter users that have watched in dismay as their beloved platform crumbles in the hands of Elon Musk.
In less than 24 hours, Threads attracted some 30 million users. And with Meta already having more than two billion Instagram users who can directly link their accounts to it, Threads’ user base will grow fast.
With its simple black and white feed, and features that let you reply, love, quote and comment on other people’s “threads”, the similarities between Threads and Twitter are obvious.
The question now is: will Threads be the one that finally unseats Twitter?
In October of last year, Twitter users looked on helplessly as Elon Musk became CEO. Mastodon was the first “escape plan.” But many found its decentralized servers difficult and confusing to use, with each one having very different content rules and communities.
Many Twitter fans created “back up” Mastodon accounts in case Twitter crashed, and waited to see what Musk would do next. The wait wasn’t long. Platform instability and outages became common as Musk started laying off Twitter staff (he has now fired about 80% of Twitter’s original workforce).
Shortly after, Musk horrified users and made headlines by upending Twitter’s verification system and forcing “blue tick” holders to pay for the privilege of authentication. This opened the door for account impersonations and the sharing of misinformation at scale. Some large corporate brands left the platform, taking their advertising dollars with them.
Musk also labeled trusted news organizations such as the BBC as “state-owned” media, until public backlash forced him to retreat. More recently, he started limiting how many tweets users can view and announced that TweetDeck (a management tool for scheduling tweets) would be limited to paid accounts.
Twitter users have tried several alternatives, including Spoutible and Post. Bluesky, which came from Twitter co-founder Jack Dorsey, is gaining ground – but its growth has been limited due to its invitation-only registration process.
Nothing had quite captured the imagination of Twitter followers … until now.
Before Musk’s reign, Twitter enjoyed many years of success. It had long been a home for journalists, governments, academics and the public to share information on the key issues of the day. In emergencies, Twitter offered real-time support. During some of the worst disasters, users have shared information and made life-saving decisions.
While not without flaws – such as trolls, bots and online abuse – Twitter’s verification process and the ability to block and report inappropriate content was central to its success in building a thriving community.
This is also what sets Threads apart from competitors. By linking Threads to Instagram, Meta has given itself a significant head-start towards reaching the critical mass of users needed to establish itself as a leading platform (a privilege Mastodon didn’t enjoy).
Not only can Threads users retain their usernames, they can also bring their Instagram followers with them. The ability to retain community in an app that provides a similar experience to Twitter is what makes Threads the biggest threat yet.
My research shows that people crave authority, authenticity and community the most when they engage with online information. In our new book, my co-authors Donald O Case, Rebekah Willson and I explain how users search for information from sources they know and trust.
Twitter fans want an alternative platform with similar functionality, but most importantly they want to quickly find “their people.” They don’t want to have to rebuild their communities. This is likely why so many have stayed on Twitter, even as Musk has done so well to run it into the ground.
Of course, Twitter users may also be concerned about jumping from the frying pan into the fire. Signing up to yet another Meta app comes with its own concerns.
New Threads users who read the fine print will note that their information will be used to “personalize ads and other experiences” across both platforms. And users have pointed out you can only delete your Threads account if you delete your Instagram account.
This kind of entrenchment could be off-putting for some.
Moreover, Meta decided to not launch Threads anywhere in the European Union yesterday due to regulatory concerns. The EU’s new Digital Markets Act could raise challenges for Threads.
For example, the act sets out businesses can’t “track end users outside of [their] core platform service for the purpose of targeted advertising, without effective consent having been granted.” This may be in conflict with Threads’ privacy policy.
Meta has also announced plans to eventually move Threads towards a decentralized infrastructure.
In the app’s “How Threads Works” details, it says “future versions of Threads will work with the fediverse”, enabling “people to follow and interact with each other on different platforms, including Mastodon.”
This means people will be able to view and interact with Threads content from non-Meta accounts, without needing to sign up to Threads. Using the ActivityPub standard (which enables decentralized interoperability between platforms), Threads could then function the same way as WordPress, Mastodon and email servers – wherein users of one server can interact with others.
When and how Threads achieves this plan for decentralized engagement – and how this might impact users’ experience – is unclear.
As for Musk, he’s not going down without a fight. Just hours after Threads’ release, Twitter’s lawyer Alex Spiro released a letter accusing Meta of “systematic” and “unlawful misappropriation” of trade secrets.
The letter alleges former Twitter employees hired by Meta were “deliberately assigned” to “develop, in a matter of months, Meta’s copycat ‘Threads’ app.” Meta has disputed these claims, according to reports, but the rivalry between the two companies seems far from over.
Lisa M Given is Professor of Information Sciences & Director, Social Change Enabling Impact Platform, RMIT University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
As Janet Yellen kicks China’s economic tires in Beijing this week, she may be surprised by how often the attention is veering toward neighboring Japan.
It just so happens that Yellen’s first China trip as US Treasury secretary coincides with intense debate about Asia’s biggest economy experiencing a Japan-like “balance sheet recession,” one that, if true, will be devilishly hard to reverse.
The reference here is to economist Richard Koo’s oft-cited observation about why Japan plunged into deflation and stagnation in the 1990s. Specifically, this is when economic insecurity prods a critical mass of households and companies to prioritize boosting savings and paying down debt over consuming and investing.
Unlike a formal recession, where gross domestic product (GDP) contracts, the balance sheet variety condemns an economy to underperform for several years.
It’s clear that as 2023 unfolds, “investors are concerned that China may have entered a liquidity trap or is experiencing a balance sheet recession,” says economist Carlos Casanova at Union Bancaire Privée, with the caveat that for now “these fears might be overstated.”
Yet the trouble with Japan-like economic funks is how souring sentiment can take on a life of its own. Herein lies the greater risk for Chinese leader Xi Jinping and Premier Li Qiang.
“Chinese policymakers are going about tackling the different factors underpinning weak sentiment,” Casanova explains. “Given the scattered nature of this support, it may take time for upside pressures on domestic asset prices to build and the Chinese yuan to stabilize.”
Koo, too, thinks China “is entering a balance-sheet recession,” partly because “people are no longer borrowing money” due to worries about the growth outlook and stability of asset markets. As households and companies focus on reducing debt, China’s growth can’t return to pre-Covid levels, he worries.
“I hope Chinese policymakers understand and respond to these challenges, because this might be the last chance for China to reach the living standards of the First World,” Koo explains.
Economist Ting Lu at Nomura Holdings worries that “China’s real estate sector is now starting to look somewhat similar to Japan in the 1990s.” As of May, for example, contract sales among the mainland’s 100 top developers were down roughly 57% versus pre-Covid-19 levels in 2019.
Though Japan’s plunge into deflation had several causes, cratering land prices — and the high degree of exposure to those prices among the nation’s biggest banks — was a key catalyst. The overhang set in motion the bad loan crisis that was core to Japan’s multi-decade malaise.
Economist Alicia Garcia Herrero at Natixis says land sales are “one of the most important components of China’s local government revenue.” She adds that “given the challenges faced by China’s property market are largely structural, i.e., slower income growth, population aging, we expect the land sales revenue to continue being under stress down the road.”
Xi’s policymakers have sought to downplay such concerns. In March, Chinese Finance Minister Liu Kun argued that a 2 trillion yuan (US$276 billion) drop in land sales would only result in a 300 billion yuan loss to local governments’ fiscal positions. That neat assessment may or may not add, however.
Clearly, economists can take the Japan-China comparisons too far. In 2021, economist Lan Xiaohuan published a best-selling book, “Embedded Power: Chinese Government and Economic Development”, detailing the unique dynamics of local property markets.
As Lan explains, “the real power is not ‘land as fiscal finance,’” but “using land as collateral to accelerate bank lending and other forms of credit. When ‘land as fiscal-finance’ meets the capital market and adds leverage, it becomes ‘land finance’” with Chinese characteristics.
Extreme opacity is an added problem. Along with privately-owned real estate companies, the top power brokers are state-owned entities known as Local Government Financing Vehicles (LGFVs), which borrow to finance infrastructure, industrial parks and housing across Asia’s biggest economy.
LGFVs’ outsized revenue role is now among the “main obstacles for broad-based macro support” for an economy losing momentum, says Casanova. They’re at the core of “PBOC concerns about financial risks” along with “households remaining on the fence” about “deploying pandemic surpluses due to weak sentiment.”
However, Casanova notes, “without additional targeted measures, those two reinforce each other, resulting in a deflationary spiral and making it harder for the economic recovery to broaden its base.”
Yet Koo argues that China has a key advantage over Japan: it can learn from Tokyo’s mistakes.
The key lesson, Koo says, is that stimulus treats the symptoms of China’s troubles, not the underlying ailment. While it’s vital that Beijing steps forward to ensure that giant building projects are completed, reforms to repair the property sector and build robust social safety nets are the key to avoiding “Japanification” risks.
Stabilizing property is vital to improving the quality of economic growth and reducing the frequency of boom-bust cycles. Social safety nets are needed to prod households to save less and spend more.
The good news is that China has “a fairly strong administrative system which can put losses where they should be — where they can be easily absorbed,” Raghuram Rajan, former chief economist at the International Monetary Fund, told Bloomberg.
It may help, too, that the economic reform portfolio is now in Li’s hands. Unlike his predecessor, the newish premier appears to have Xi’s full confidence. That top-level buy-in is vital if Li is to pull off a monumentally difficult balancing act.
Li must support growth in the short run while maintaining the progress China has made in reducing extreme leverage and getting under the economy’s hood to recalibrate engines from exports to domestic consumption. Naturally, the People’s Bank of China (PBOC) will play a key role in smoothing out GDP.
Markets need to be “thinking about the likelihood of further easing ahead,” says economist Rob Carnell at ING Bank referring to benchmark Chinese interest rates. He adds that “we’re going to get plenty more of those” moves to add liquidity in coming months “to keep [the] yuan on the back foot.”
Economist Joey Chew at HSBC Holdings says “some think that more concrete, non-monetary stimulus measures will only come out at or after the Politburo meeting in end-July. If so, some foreign-exchange policy smoothing may be needed in the meantime as we head into the dividend outflow season for China.”
Not everyone is convinced big stimulus moves are coming. Goldman Sachs economist Maggie Wei notes that recent meetings with greater China region investors unearthed lots of doubt. “Local clients did not expect major policy easing measures or structural reform measures to be rolled out in the July Politburo meeting” later this month, Wei says.
To some extent, the yuan’s 5% drop this year limits the PBOC’s options. Indeed, additional rate cuts might weaken the yuan to levels that exacerbate trade tensions with Washington and Tokyo. At the same time, a weaker yuan would increase default risks for China’s bigger property developers.
“The lesson from Japan’s lost decades is that without a timely debt clean-up and demand stimulus, the deleveraging mindset could become entrenched in the private sector and, after a certain point, even zero interest rates would not be able to help,” says economist Wei Yao at Societe Generale. It follows that “such a danger seems increasingly relevant for China, as evident in households’ strong appetite for savings.”
In the interim, interest margins among mainland banks “will be under persistent downward pressure if more of their lending capacity is used for extending loans to LGFVs at below-market rates,” Yao says.
China also faces an imponderable that Japan didn’t in the 1990s: a full-blown trade war with Washington.
Yellen’s presence in Beijing this week speaks to the high drama complicating Li’s job in stabilizing the economy. To some observers, Yellen’s trip is meant to reduce the geopolitical temperature following US Secretary of State Antony Blinken’s recent visit.
“I would say it’s a little bit like good cop, bad cop, Blinken being the bad cop,” former IMF chief economist Ken Rogoff told the BBC. “And now Yellen going in as the good cop trying to say, look, you know, we have a lot in common. Let’s see what we can do together.”
Even so, Yellen manages to throw some sharp elbows. On Friday, she chided Beijing for policies toward US companies and a recent move to limit the export of gallium and germanium, niche minerals used in some chip-making.
“During meetings with my counterparts,” Yellen said, “I am communicating the concerns that I’ve heard from the US business community — including China’s use of non-market tools like expanded subsidies for its state-owned enterprises and domestic firms, as well as barriers to market access for foreign firms. I’ve been particularly troubled by punitive actions that have been taken against US firms in recent months.”
Xi’s government, of course, has its own gripes about US President Joe Biden’s efforts to make American manufacturers less reliant on Chinese production.
In the meantime, though, it’s hard to refute that “China’s economic development model resembles that of Japan over 30 years ago with high savings and high investment, but with restrained consumption and rigid institutions weighing increasingly on macroeconomic success,” notes George Magnus, a research associate at Oxford University’s China Centre.
Magnus adds that “China’s chronic over-investment and misallocation of capital, particularly in the property sector, pose a potentially bigger economic problem than Japan’s banking crisis in the 1990s.”
On the bright side, Magnus says, “China has some advantages over Japan, such as a state-owned financial system that can prevent significant banks from failing and a closed capital account that can protect the country’s banking system and the economy from the risk of significant capital flight. This however might not prevent China from taking the same economic trajectory [of] Japan.”
That requires urgent and creative moves to repair the property market, create robust social safety nets and put China on a path toward more productive economic growth. China can surely avoid Japan’s lost decades, but there’s not a moment to waste in shifting the narrative about the economy’s downward trajectory.
Follow William Pesek on Twitter at @WilliamPesek
TOKYO – Renesas, Japan’s top maker of automotive chips, has reached a 10-year supply agreement with America’s Wolfspeed, the world’s leading producer of the silicon carbide wafers used to make power semiconductors.
Both companies have ambitious plans to meet rapidly growing demand for electric vehicles (EVs) and charging infrastructure, renewable energy generation and storage, and industrial motor control and other power management.
A US$2 billion deposit from Renesas will support Wolfspeed’s capacity expansion plans in the state of North Carolina. Meanwhile, a guaranteed supply of Wolfspeed-made wafers will support Renesas’ power device manufacturing in Japan. The agreement was signed at Renesas’ headquarters in Tokyo on July 5.
Wolfspeed CEO Gregg Lowe said that “With the steepening demand for silicon carbide across the automotive, industrial and energy sectors, it’s critically important we have best-in-class power semiconductor customers like Renesas to help lead the global transition from silicon to silicon carbide.”
Renesas CEO Hidetoshi Shibata said, “The wafer supply agreement with Wolfspeed will provide Renesas with a stable, long-term supply base of high-quality silicon carbide wafers. This empowers Renesas to scale our power semiconductor offerings to better serve customers’ vast array of applications. We are now poised to elevate ourselves as a key player in the accelerating silicon carbide market.”
Compared with silicon, silicon carbide offers greater energy efficiency and reliability through resistance to higher voltages, tolerance of a wider range of temperatures and vibration, and longer device lifetimes. As production volumes rise and prices fall, the use of silicon carbide should also lead to lower power management system costs.
Wolfspeed, formerly known as Cree, has been making silicon carbide wafers and power devices for more than 35 years. It also produces radio frequency devices and gallium nitride materials. Its products are used in communications infrastructure, satellite communications, aerospace and defense.
In April 2022, Wolfspeed opened the world’s first 200mm (8-inch) silicon carbide wafer factory in New York. In September 2022, the company announced plans to build a big new silicon carbide materials facility in North Carolina that aims to boost production by more than 10 times by 2030.
This is in line with market research organizations’ forecasts of the silicon carbide market’s potential.
Phase one of the North Carolina facility, estimated at $1.3 billion is scheduled for completion in 2024. Industry sources estimate Wolfspeed’s share of the silicon carbide wafer market at more than 60%.
200mm wafers are 1.7x larger than the 150mm (6-inch) wafers that were previously the silicon carbide industry standard. Larger wafers mean more chips per wafer and a lower cost per chip. Wolfspeed will supply Renesas first with 150mm wafers and then with 200mm wafers as its production capacity increases.
Renesas manufactures semiconductor products for automotive, industrial, infrastructure, internet of things (IoT) and other applications. It is a world leader in microcontrollers for the auto industry.
The Japanese company also possesses embedded processing, analog, power management, radio frequency, SoC (system-on-chip) and other semiconductor technologies.
In May 2022, Renesas announced plans to refurbish and reopen its old Kofu factory and start making power semiconductors on 300-mm (12-inch) silicon wafers there in 2024.
In 2025, the company plans to start mass production of silicon carbide devices with wafers procured from Wolfspeed at its factory in Takasaki. At present, the Takasaki factory makes silicon power devices.
Renesas has doubled its revenues over the past five years, with growth in the auto, industrial, infrastructure and IoT markets accelerated by six acquisitions, namely:
Leveraging these strategic acquisitions, Renesas now plans to become a big producer of both silicon and silicon carbide power devices.
Their synergy with the company’s existing products and strong market demand point toward substantial growth ahead. Investors certainly think so: Renesas’ share price is up 2.3 times so far this year.
In July 2022, less than a month before President Joe Biden signed the CHIPS Act, CEO Shibata told the press that Renesas does not plan to make semiconductors in the US.
“When it comes to front-end production [the manufacture of chips on wafers],” he said, “I don’t necessarily believe there are good supplies of ingredients in geographies like Europe or the US”
By “ingredients,” he seems to have meant high costs and shortage of skilled labor – the same issues chip-making giant TSMC has been complaining about in Arizona.
Buying silicon carbide wafers from Wolfspeed, on the other hand, apparently makes more commercial sense to Renesas than sourcing them from smaller and less experienced manufacturers in Japan.
These companies, including Showa Denko, Central Glass, Mipox and Oxide, are part of a silicon-carbide development project run by Japan’s New Energy and Industrial Technology Development Organization (NEDO). Despite handsome government support, they did not win the Renesas contract.
Rohm, one of Japan’s leading makers of power devices, relies on SiCrystal, a German company it acquired in 2010, for its silicon carbide wafers. SiCrystal also sells wafers to other companies.
On June 29, Rohm signed a long-term agreement to supply silicon carbide power semiconductors to Vitesco Technologies, a German maker of electrified vehicle drive systems. This deal, too, appears to be economic rather than political.
Follow this writer on Twitter: @ScottFo83517667
The Shanghai government is stepping up its efforts to attract artificial intelligence (AI) talent and investments and improve regulations with the objective of building a world-class AI hub in Pudong.
Top Shanghai officials said in the World AI Conference on Thursday that the largest commercial city in China – which hosts the conference – will gather and groom AI experts to strengthen research and development and promote the use of AI technologies in the advanced manufacturing, urban management and robotics sectors.
However, Shanghai may face a hardware problem starting later this month, as the Biden administration is set to ban exports of Nvidia’s A800 and H800 AI chips to China soon and also restrict US investment funds from putting money into China’s high-technology sector.
In recent years, China’s Huawei Technologies and Cambricon Technologies have launched their AI chips, which are said to run at speeds of 60-to-70% that of Nvidia’s A100 chip. But the manufacturing of these chips is now done by Taiwan’s TSMC and can be affected by the prospective US curbs.
On May 25, the Shanghai government in a document called upon private capital to invest in new infrastructure. It said it will extend the implementation period of its policy to provide an interest subsidy of up to 1.5 percentage points to private firms that build AI facilities.
It said integrated circuit, biomedical and AI sectors are the three most important industries that will build the “Shanghai high ground.”
Currently, Chinese AI firms can still buy A800 and H800 chips, which were introduced by Nvidia last November after the company’s A100 and H100 chips were added to a US export control list last August. It is said that A800’s performance has reached 70% of the A100’s.
Media reports said last week that the US Commerce Department may also ban the exports of A800 and H800 chips to China soon. The announcement reportedly would be made after US Treasury Secretary Janet Yellen’s four-day Beijing trip ends on July 9.
Ken Hu, rotating chairman of Huawei, said on Thursday that the company has been working hard developing AI chips and industrial applications in recent years.
Hu said both Huawei’s Ascend AI chips and Kunpeng central processing units (CPUs) have already made some key breakthroughs.
According to a research report published by CITIC Securities on Tuesday, more than 20 Chinese cities have used Ascend chips in their AI facilities while Huawei now has a 79% share in China’s AI computing center market.
Some media reports said Ascend 910’s performance is about 70% of that of the A100 while Cambricon’s Siyuan 370’s performance is about 60-70% of the A100. Both chips are manufactured in Taiwan using TSMC’s advanced 7nm technology.
In May 2019, the US Commerce Department put Huawei and its 70 affiliates on its so-called entity list, on national security grounds. Huawei then started using inventory chips plus self-developed Kirin chips to maintain its smartphone output.
In September 2020, Taiwan’s TSMC stopped producing Kirin chips. In the third quarter of last year, Huawei ran out of its high-end processors and could no longer produce 5G-capable phones.
A Hainan-based columnist published an article last month with the title “Huawei’s Ascend 910 chip is leading in AI computing. Why is it not affected by the US sanctions?”
“Why can TSMC still make Ascend 910 chips but not Kirin 5G ones for Huawei? It’s because they used different technologies,” he says in the article.
He says Ascend 910 used Huawei’s self-developed Da Vinci architecture while Kirin chips used the United Kingdom’s ARM architecture, as well as technologies of the United States’ Cadence and Synopsys.
He adds that TSMC is a Taiwanese foundry, not an American firm, so it enjoys some space to maintain a business relationship with Huawei.
But a Fujian-based writer says that, even if TSMC can continue to produce AI chips for China, Chinese firms lack the tools to develop more advanced AI chips amid the US curbs and will be left behind by Nvidia.
In May, Nvidia said it will hire 1,000 people and invest up to TWD24.3 billion (US$790 million) in its new AI research center, or AI University, in Taiwan.
The WAIC has been held in Shanghai annually since 2018. This year’s event attracted a lot more attention as the AI sector has become popular after the Microsoft-backed OpenAI unveiled ChatGPT 3.5, an AI chatbot, last November. Share prices of Nvidia, which has a more than 80% share in the AI chip markets, have grown 196% so far this year.
“There is a tremendous number of very smart and talented people in China,” Tesla founder Elon Musk said in a video shown during the WAIC. “The Chinese can be great at anything if they set their minds to, not only in many sectors of the economy but also in AI. I believe that China will have strong AI capabilities.”
“We will create a good atmosphere for gathering AI talent from all over the world, and accelerate the training of a group of top-notch and urgently-needed talents,” Shanghai party secretary Chen Jining said in opening speech at the WAIC. “We will adhere to open collaboration, build a platform, encourage cooperation, and create an open-source and innovative ecology.”
“We will actively explore the application practice of general AI technologies in vertical fields such as advanced manufacturing and urban management, and accelerate the development of embodied AI and robotics industries,” Chen said. “The government will strengthen safety supervision and continue to improve the AI governance and application standards.”
Shanghai Mayor Gong Zheng said Shanghai must firmly grasp the wave of new technological revolutions such as AI to upgrade its industries and turn itself into a socialist modern international metropolis with world influence. Gong said the city aims to build a high ground for itself in the AI industry.
Read: Sanctions starting to bite Huawei 4G chips sourcing
Read: Nvidia to turn Taiwan into a world-class AI hub
Follow Jeff Pao on Twitter at @jeffpao3