British chip designer ARM reportedly refuses to sell advanced chip designs to a Chinese company, citing US/UK export restrictions
Chinese tech firms are starting to feel the impact of British and American national security export restrictions.
The Financial Times reported that Chinese tech giant Alibaba cannot buy some of the most advanced data centre chip designs, after British chip designer ARM Holdings determined that the US and UK would not approve licences to export the technology to China.
This is first known time that ARM has decided it could not export its most cutting-edge designs to China.
ARM concluded that the US and UK would not approve the sale of its latest Neoverse V data centre chips because the performance was too high, people with knowledge of the sales process told the Financial Times.
The move reportedly impacts Alibaba’s T-Head chip unit and other Chinese groups.
The FT reported that ARM’s Neoverse V chip falls under Wassenaar – a multilateral arrangement signed in 1996 by 42 nations, which is designed to stop dual-use technology from being diverted for military use – and that ARM would need US and UK export licences to sell the technology.
In early October the US extended its use of export controls that were first deployed against Huawei. The US Commerce Department applied these rules more broadly to target the ability of China to produce cutting-edge semiconductors.
Later that same month, the Biden administration indicated it would extend its chip export restrictions against China, by signing a deal with allies to bring them on board with new US rules halting China’s access to sophisticated chipmaking tools,
Now two months after these tough export controls to prevent China from obtaining advanced chips or securing the technology and equipment to make high-end semiconductors domestically, the reality of new restrictions is starting to become apparent.
Paul Triolo, a China and technology expert at the Albright Stonebridge Group consultancy, told the FT that the US Commerce Department’s 7 October export controls also updated restrictions in ways that impacted the kind of technology ARM produces.
“Key companies in the semiconductor supply chain, including IP core players such as ARM . . . must determine whether the capabilities provided in their offerings meet or exceed the technical requirements in the new [7 October] commerce regulations,” Triolo reportedly said.
While ARM could apply for licences to sell the technology, the odds of success are very low given the US strategy to deny China technology that could have military applications, the FT noted.
When the US introduced the new measures in October, it stressed that there would be a presumption to deny licences to export technology related to advanced chips to China.
It should be remembered that in September the US had ordered Nvidia and AMD to halt exports to China of certain high-performance chips that could be used for artificial intelligence.
That same month, the Biden administration also told those receiving federal funding under the US CHIPS act, that they would not be allowed to invest in China.
ARM however is a British firm (owned by Japan’s Softbank), but it significant operations in the United States.
According to the FT, ARM is seen as vulnerable to the Biden administration’s use of export controls that target Beijing.
Like most tech companies around the world, Chinese companies rely heavily on ARM’s designs to build devices from smartphones to servers.
“We feel that the western world sees us as second-class people,” one engineer from Alibaba’s T-Head was quoted by the FT as saying. “They won’t sell good products to us even if we have money.”
The engineer said US sanctions were creating a two-tier system, and pointed out that Neoverse V, which was released last year, was already being used by Amazon Web Services in the US for its state of the art cloud computing chip.
A person close to ARM told the FT that the company was working with Alibaba and other Chinese partners to identify solutions that help them meet their performance requirements, while being compliant with the latest export controls.
The ARM move comes as Bloomberg reported on Tuesday that the Biden administration is now also planning to place Chinese chip maker Yangtze Memory Technologies and 35 other Chinese firms on a trade blacklist that would prevent them from buying certain American components.