Is the TikTok owner’s secret weapon to bypass US sanctions hidden in a new AI chip project? 🚀

Rumors have emerged that ByteDance, the Chinese tech giant behind TikTok, is collaborating with U.S. chip designer Broadcom to develop a 5 nanometer application-specific integrated chip (ASIC) for advanced AI applications. This collaboration, if confirmed, would secure ByteDance a stable supply of high-end chips crucial for its AI ambitions. The manufacturing would be outsourced to Taiwan’s TSMC. This partnership would be significant as it marks a rare collaboration involving advanced technology between Chinese and U.S. companies since the U.S. imposed export controls in 2022.

ByteDance’s move aims to reduce procurement costs and ensure a reliable supply of high-end chips amidst fierce competition and U.S. export restrictions. ByteDance has previously partnered with Broadcom, purchasing their high-performance switch chips. Securing advanced AI chips is vital for ByteDance to enhance the performance of its popular apps, including TikTok, Douyin, and Doubao. The tech industry is closely watching for official confirmations of this potential collaboration.

Development of the 5 Nanometer Chip

ASIC Compliance and Manufacturing

The advanced AI processor in question is a 5 nanometer application-specific integrated chip (ASIC), designed to comply with U.S. export restrictions. The manufacturing of this customized chip would be outsourced to Taiwan’s TSMC, one of the world’s leading semiconductor foundries. This collaboration stands out as there have been no publicly announced chip development projects involving such advanced technology between Chinese and U.S. companies since Washington introduced export controls for cutting-edge semiconductors in 2022.

Implications for the Tech Industry

If the rumors are true, ByteDance’s partnership with Broadcom would be a strategic move to reduce procurement costs and ensure a reliable supply of high-end chips. This is particularly important as U.S.-China deals in the semiconductor sector generally involve much less sophisticated technology. The involvement of TSMC adds another layer of complexity, as it is a crucial player in the global semiconductor supply chain.

ByteDance’s Push in Generative AI

AI Ambitions and Challenges

ByteDance has been aggressively pushing into the generative artificial intelligence space, which requires a significant amount of high-performance chips. However, the company faces a more limited supply of AI chips compared to its overseas counterparts. This is largely due to U.S. export controls aimed at preventing advancements in AI and supercomputing by China’s military. As a result, ByteDance has had to contend with fierce competition for available U.S. chips and those developed by Chinese companies like Huawei.

Securing AI Chips

Securing AI chips is crucial for ByteDance to enhance the performance of its algorithms. The company operates a variety of popular apps, including TikTok and its Chinese counterpart Douyin, as well as a ChatGPT-like chatbot service called Doubao, which boasts 26 million users. To support its AI initiatives, ByteDance has reportedly stockpiled Nvidia chips, including the A100 and H100 models available before U.S. sanctions, as well as the A800 and H800 models designed for the Chinese market but later restricted. ByteDance is said to have allocated $2 billion for the purchase of Nvidia chips last year alone.

Existing Partnership with Broadcom

Historical Collaboration

ByteDance and Broadcom have been business partners since at least 2022. ByteDance has previously purchased Broadcom’s Tomahawk 5nm high-performance switch chip and the Bailly switch for AI computer clusters. This existing relationship could serve as a foundation for the rumored collaboration on the new AI processor.

Strategic Significance

The development of a 5 nanometer ASIC would not only strengthen ByteDance’s technological capabilities but also position it more competitively in the global AI landscape. By collaborating with Broadcom, ByteDance could mitigate some of the challenges posed by U.S. export restrictions and ensure a more stable supply of advanced AI chips.

What China is Doing To Bypass U.S. Microchip Restrictions

China is employing several strategies to bypass US sanctions on microchips:

1. Focusing on legacy chip production: China has significantly increased its production of older-generation chips not subject to US export controls. In Q1 2024, China’s legacy chip production jumped by 40%, potentially making China a global leader in this segment.
2. Exploiting loopholes: Chinese companies have been accessing restricted chips through cloud services and renting computing capacity from US providers like Oracle. Some firms are also smuggling chips through intermediaries or neighboring countries.
3. Developing domestic capabilities: China is heavily investing in its semiconductor industry, with a $40 billion state-backed fund announced in September 2023. The country is also focusing on research and development to become more self-reliant.
4. Using alternative currencies: China is promoting the use of renminbi in international transactions to avoid US dollar-denominated sanctions.
5. Building international networks: China is developing alternative financial networks and expanding its Cross-border Interbank Payment System (CIPS) to circumvent potential financial sanctions.
6. Retaliatory measures: China has initiated cybersecurity reviews of foreign companies like Micron and blocked mergers involving US firms to pressure the US and its allies.
7. Diplomatic pressure: China is attempting to divide the US from its allies by pressuring countries like the Netherlands and Japan to not align with US export controls.
8. Accessing chips through third countries: Chinese companies are reportedly buying chips from countries not subject to US export controls.

These actions have had several impacts:

1. Increased tensions: The chip war has escalated tensions between the US and China, potentially leading to further restrictions and retaliation.
2. Shifts in global supply chains: China’s focus on legacy chips could lead to overcapacity and price wars, potentially harming Western chipmakers.
3. Technological competition: China’s investments may accelerate its technological development, potentially narrowing the gap with Western countries in some areas.
4. Economic implications: The restrictions and China’s responses are reshaping global trade patterns and investment flows in the semiconductor industry.
5. National security concerns: The US and its allies are increasingly viewing China’s chip industry as a potential threat, leading to more stringent controls.

Looking Ahead

While the rumors of a collaboration between ByteDance and Broadcom on an advanced AI processor have yet to be confirmed, the potential partnership highlights the ongoing strategic maneuvers in the tech industry amid the U.S.-China Chip Wars. If true, this collaboration could significantly impact ByteDance’s AI capabilities and position in the global market. As both companies navigate the complexities of international trade and technology restrictions, the tech world watches closely for any official announcements.

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