Investors sensitive to every development in the global AI chip race between the US and China

The intense global competition between the United States and China for leadership in artificial intelligence chips has taken a new turn with recent developments. The struggle, often playing out in geopolitical arenas, recently focused on a household in Taipei, Taiwan, where an employee of US-based AI chip leader Nvidia was arrested on suspicion of smuggling chips to China.

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This is the eighth case of chip smuggling worldwide in recent months.

This incident, reported by Bloomberg, is the eighth such chip smuggling case in recent months, providing tangible evidence of a burgeoning black market for the most advanced chips essential for training and operating AI models. Most of these cases involve smuggling to China, a logical consequence of strict US government restrictions on chip exports to the country, particularly for AI-related technology. Similar restrictions have long applied to advanced chip manufacturing equipment from Dutch company ASML.

Further news indicates that export bans, intended to hinder a powerful competitor, may have limited shelf lives. Tech publication The Information reported that China is establishing a factory to produce its own immersion DUV chip machines. While DUV machines do not produce the absolute most advanced chips, China's ability to build them domestically would lessen its dependence on foreign suppliers. ASML's advanced EUV technology is already restricted from sale to China, and its DUV machines also face less stringent export controls.

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The Chinese are starting a factory to build their own immersion DUV chip machines.

American politicians are pushing for further restrictions on China's chip industry, which could impact ASML, a company that derives approximately 20 percent of its revenue from China. The Dutch government, along with US tech giant Apple, which has significant interests in China, opposes further US actions. Details about the Chinese factory remain unverified, with reports suggesting it might be located in Shanghai and staffed by former employees of companies like Yuliangsheng Technology. Reuters reported, citing an anonymous source, that the involved company is Shanghai Aishengna Electronic Technology Group, a newly established entity with little public information. Reports suggest China aims to produce its first five DUV machines this year for domestic companies, with production expected to reach twenty machines by 2027. For comparison, ASML delivered 131 DUV machines globally last year.

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ASML delivered 131 DUV machines worldwide last year, out of a total of 278 systems.