BEIJING, July 5 (TMTPost)—The high-tech war between U.S. and China seems to be escalating, especially in the semiconductor industry.

Credit：Visual China

The Biden administration is mulling a new rule that could require Amazon, Microsoft and other American cloud service providers to apply for government permission if they want to continue their services used for advanced artificial intelligence (AI) chips to Chinese customers, and the Department of Commerce could unveil the rule in the upcoming weeks, the Wall Street Journal reported, citing people familiar with the matter. The rule was said to aim to close a significant loophole in U.S. chip export controls. Cloud services allow Chinese companies to gain computing capabilities even they didn’t import cutting-edge technologies from U.S., such as A100, a powerful AI chip made by Nvidia, according to the report. If the new rule were adopted, the United States would expand affect of its export control on chipmakers to cloud service providers.

The news suggests U.S. clampdown on China’s semiconductor industry is going to extremes, and the Biden administration has done whatever it can to stop China's high-tech rise, so as to maintain US tech hegemony, Xiang Ligang, director-general of Information Consumption Alliance, a Beijing-based telecom industry association, told the state-backed newspaper the Global Times. The expert expected the reported looming curb could not have any meaningful impact on AI sector in China since the cloud service market is dominated by Alibaba, Tencent and other four domestic providers.

The leading players in mainland China’s cloud infrastructure market remained unchanged in the first quarter of 2023, with Alibaba Cloud, Huawei Cloud, Tencent Cloud, and Baidu AI Cloud maintaining their positions as the top four cloud vendors, according to Canalys. The “Big Four” together accounted for 79% of total expenditure in mainland China, with an increase of 6% year-on-year, the tech market analyst firm estimated in June.

The U.S. potential restriction on cloud services came as China announced an export control on shipments of some metals that are used in chipmaking as well as defense, communications and green energy.

Gallium-related items such as gallium metal, gallium nitride, gallium oxide, gallium phosphide, etc., and germanium-related items such as germanium metal, zone refined ingots, zinc germanium phosphide and germanium dioxide, shall not be exported without permission from August 1, according to an announcement of the Ministry of Commerce on Monday. The move, aiming to protect national security, was deemed as the latest response to U.S.’s increasing efforts for more curbs on China’s high-tech industry.

Gallium is mainly used for semiconductor and photoelectric materials, solar cells, alloys, medical devices and magnetic materials in China. 80% of the metal output was consumed by the semiconductor industry. With the rapid development of the gallium downstream application industry, especially the semiconductor industry and solar cell industry, the demand for the metal will also grow steadily in the future. Germanium is an important semiconductor material with wide and important applications in semiconductors, aerospace measurement and control, radiation detection for nuclear physics, fiber-optic communication, infrared optics, solar cells, chemical catalysts and biomedicine.

“China is always committed to keeping the global industrial and supply chains secure and stable, and has always implemented fair, reasonable and non-discriminatory export control measures, “ Chinese Foreign Ministry spokesperson Mao Ning commented, when asked about whether the export control is inconsistent with the government’s commitment to keeping the global supply chains stable. The export control, in accordance with law, is a common international practice and does not target any specific country, Mao said. Another spokesperson Wang Wenbin reiterated the export control is not used to target any specific country. Wang stressed the move is “completely legitimate and justified”. He noted industrial products and materials containing gallium and germanium apparently can be used for both military and civilian purposes, and EU members have also imposed export control over relevant products and materials.

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