The United States added five Chinese companies to a blacklist on Friday, restricting their access to US technology. The so-called Entity List “identifies entities for which there is reasonable cause to believe, based on specific and articulable facts, have been involved, are involved, or pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States.”
The companies in question are: Sugon, Higon, Chengdu Haiguang Integrated Circuit, Chengdu Haiguang Microelectronics Technology, and Wuxi Jiangnan Institute of Computing Technology. One of these, Higon (also spelled Hygon) is a fabless semiconductor joint venture between AMD and THATIC responsible for selling x86 CPUs for the Chinese server market. THATIC is itself composed of two separate joint ventures — Chengdu Haiguang Microelectronics Technology and Chengdu Haiguang Integrated Circuit Design. If you look at the list above, both of these companies are on it.
In short, the US government appears to have just banned THATIC, the two companies that formed it, and the fabless semiconductor venture intended to design and sell x86 CPUs in China. According to the government’s briefing document, all of these companies are partially owned by Sugon, which seems to be the firm primarily being targeted. The Department of Commerce document states that Sugon and Wuxi Jiangnan Institute of Computing Technology have been determined to be involved in activities:
determined to be contrary to the national security and foreign policy interests of the United States… Sugon, the Wuxi Jiangnan Institute of Computing Technology, and the National University of Defense Technology (NUDT) are the three entities leading China’s development of exascale high performance computing. Sugon has publicly acknowledged a variety of military end uses and end users of its high-performance computers.
This would seem to be a serious problem for AMD’s efforts to build its business in China as part of the THATIC joint venture. We reached out to AMD and received the following statement:
We are currently evaluating the addition of five new entities to the Entity List by the Bureau of Industry and Security. AMD will comply with the regulations governing that list, just as we have complied with US laws to date. We are reviewing the specifics of the order to determine next steps related to our joint ventures with THATIC in China.
Reports from earlier this month indicated that AMD did not license the Zen 2 architecture to THATIC. AMD’s further involvement, revenue expectations, and exposure in this matter are currently unclear.
This move comes as President Trump prepares to meet with Chinese President Xi Jinping in China next week and illustrates how export laws can be used to dramatically change the competitive landscape. These determinations will alter the balance of power between AMD and Intel in China, as well as the available market for semiconductors in that nation. The NYT reports that the US is considering adding Hikvision to the list as well. Sugon is a major manufacturer of exascale computers in China, with 10 of the fastest Chinese supercomputers according to the TOP500. Sugon is a much smaller company than Huawei, but these specific lists will still reverberate across the semiconductor industry given their exposure in the HPC market — a critical area where AMD has been hoping to gain market share.
There was a time when compute capability was considered a national resource of the United States, and strict restrictions were placed on the export of computing technology. As Steve Jobs once said, in 1999: “The Power Mac G4 is so fast that it is classified as a supercomputer by the U.S. government, and we are prohibited from exporting it to over 50 nations worldwide.” These restrictions were greatly relaxed in the years following, but there have been some moves to tighten them since. In 2015, for example, the Obama Administration forbade Intel, Nvidia, and AMD from selling chips to the Chinese government. The Trump Administration’s decision to tighten the rules further and lock down specific subsidiaries is a definite expansion of these restrictions, but not an unprecedented one.