Latest US sanctions strike strong blow to China’s GPU champions

Biren Technology and Moore Threads, two of China’s best hopes in challenging Nvidia and Advanced Micro Devices in the field of graphics processors, have been dealt a heavy blow by new US trade sanctions, as Washington moves to further frustrate China’s progress in artificial intelligence (AI), according to industry insiders and analysts.

Both of the newly sanctioned Chinese companies have clear ties to the US: Biren was founded in Shanghai in 2019 by Wall Street veteran and Harvard Law School graduate Michael Zhang Wen, while Beijing-based Moore Threads was established in 2020 by Zhang Jianzhong, former general manager of Nvidia’s China business.

The latest US move “signals a further blockade on China’s development of AI chips”, although it is just “an old way of damaging China’s semiconductor industry”, said Zhang Xiaorong, director of Chinese research institute Shendu Technology.

Biren and Moore Threads will have to deal with a plunge in demand and a slowdown in their technological development, which could affect the normal operations of their businesses to a certain extent, according to Zhang.

Both companies have strongly opposed the US sanctions. Biren said it would “appeal to relevant US departments” and called on the US government to “re-examine” its decision, while Moore Threads said it “strictly abided by the laws and regulations” of relevant jurisdictions.

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The two firms, which focus on the design of general-purpose graphics processing units (GPUs), have been seen as two of China’s best shots in meeting surging demand by Chinese Big Tech companies for AI chips to train algorithms supporting their ChatGPT-like services.

Biren released a new 7-nanometre GPU called BR100 in August last year that the firm said is capable of reaching peak performance three times better than equivalent products on the market.

Moore Threads said earlier this year that it had begun mass production of two general-purpose GPUs, Sudi and Chunxiao, and had set chip self-sufficiency as its top priority.

Both companies had been darlings for Chinese investors.

Within 18 months of its establishment, Biren had raised 4.7 billion yuan (US$642 million) from major venture capital funds such as IDG Capital and Citic Securities, while Moore Threads had completed four rounds of financing in two years, bringing its estimated valuation to over 20 billion yuan.

Biren was considering an initial public offering in Hong Kong as soon as this year, according to a Bloomberg report in July.

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However, Chinese AI chip companies still rely on external foundries to turn their designs into products, which have become increasingly difficult under US pressure.

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s most advanced contract chip maker, stopped accepting orders from Huawei’s HiSilicon chip unit after the Chinese firm landed on the Entity List in 2019.

TSMC in 2022 also suspended services to Biren to comply with US regulations, Bloomberg reported last October.

To survive, Biren and Moore Threads will now have to double down on their efforts to seek self-sufficiency in building chip-making tools and equipment.

“In the face of supply chain disruptions, shortages of key components and market access restrictions … they might step up efforts to find alternatives to cope with the challenges caused by restrictions,” said Bai Wenxi, chief economist at IPG China.