US tech leaders oppose proposed export limits

A prominent technology trade group has urged the Biden administration to reconsider a proposed rule that would restrict global access to US-made AI chips, warning that the measure could undermine America’s leadership in the AI sector. The Information Technology Industry Council (ITI), representing major companies like Amazon, Microsoft, and Meta, expressed concerns that the restrictions could unfairly limit US companies’ ability to compete globally while allowing foreign rivals to dominate the market.

The proposed rule, expected to be released as soon as Friday, is part of the Commerce Department’s broader strategy to regulate AI chip exports and prevent misuse, particularly by adversaries like China. The restrictions aim to curb the potential for AI to enhance China’s military capabilities. However, in a letter to Commerce Secretary Gina Raimondo, ITI CEO Jason Oxman criticised the administration’s urgency in finalising the rule, warning of ‘significant adverse consequences’ if implemented hastily. Oxman called for a more measured approach, such as issuing a proposed rule for public feedback rather than enacting an immediate policy.

Industry leaders have been vocal in their opposition, describing the draft rule as overly broad and damaging. The Semiconductor Industry Association raised similar concerns earlier this week, and Oracle’s Executive Vice President Ken Glueck slammed the measure as one of the most disruptive ever proposed for the US tech sector. Glueck argued the rule would impose sweeping regulations on the global commercial cloud industry, stifling innovation and growth.

While the administration has yet to comment on the matter, the growing pushback highlights the tension between safeguarding national security and maintaining US dominance in the rapidly evolving field of AI.

Wall Street rallies as AI optimism boosts chip stocks and tariff concerns ease

US stock markets climbed to one-week highs on Monday, driven by gains in semiconductor stocks and optimism over AI investments. Reports suggesting that Donald Trump’s incoming administration may adopt a more selective approach to tariffs, rather than broad measures, also helped boost investor confidence. The Dow Jones Industrial Average rose 0.41%, the S&P 500 gained 1.02%, and the Nasdaq Composite surged 1.53%, with automakers and tech stocks leading the rally.

Semiconductor shares saw strong gains after Microsoft announced an $80 billion investment in AI-enabled data centres, while Foxconn posted better-than-expected quarterly revenue. Nvidia climbed 3.5%, AMD gained 2.8%, and Micron Technology surged 9.6%, pushing the Philadelphia Semiconductor Index to a two-month high. Meanwhile, the Russell 2000 index, which tracks small-cap companies, added 0.7% as investors weighed economic data and Federal Reserve policy signals.

Investors are closely watching monetary policy developments, with the Federal Reserve expected to provide further guidance on interest rate cuts later in the week. While Trump’s proposals could support corporate earnings and economic growth, concerns remain over potential inflationary pressures. US markets will be closed on January 9 for a national day of mourning in honour of former President Jimmy Carter.

China’s tech firms growing influence

Big tech competition heats up

Chinese big tech companies have emerged as some of the most influential players in the global technology landscape, driving innovation and shaping industries across the board. These companies are deeply entrenched in everyday life in China, offering a wide range of services and products that span e-commerce, social media, gaming, cloud computing, ΑΙ, and telecommunications. Their influence is not confined to China, they also play a significant role in global markets, often competing directly with US tech giants.

The rivalry between China and the US has become one of the defining geopolitical struggles of the 21st century. This competition oscillates between cooperation, fierce competition, and confrontation, influenced by regulatory policies, national security concerns, and shifting political priorities. The geopolitical pendulum of China-US tech firms, totally independent from the US election outcome, reflects the broader tensions between the two powers, with profound implications for global tech industries, innovation, and market dynamics.

China’s access to US technology will face further restrictions after the election.

The Golden Shield Project

In 2000, under Chairman Jiang Zemin’s leadership, China launched the Golden Shield Project to control media and information flow within the country. The initiative aimed to safeguard national security and restrict the influence of Western propaganda. As part of the Golden Shield, many American tech giants such as Google, Facebook, and Netflix were blocked by the Great Firewall for not complying with China’s data regulations, while companies like Microsoft and LinkedIn were allowed to operate.

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At the same time, China’s internet user base grew dramatically, reaching 800 million netizens by 2018, with 98% using mobile devices. This rapid expansion provided a fertile ground for Chinese tech firms, which thrived without significant competition from foreign players. Among the earliest beneficiaries of this system were the BATX companies, which capitalised on China’s evolving internet landscape and rapidly established a dominant presence in the market.

The powerhouses of Chinese tech

The major Chinese tech companies, often referred to as the Big Tech of China, include Alibaba Group, Tencent, Baidu, ByteDance, Huawei, Xiaomi, JD.com, Meituan, Pinduoduo, and Didi Chuxing.

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Alibaba Group is a global e-commerce and technology conglomerate, operating platforms such as Taobao and Tmall for e-commerce, AliExpress for international retail, and Alipay for digital payments. The company also has significant investments in cloud computing with Alibaba Cloud and logistics.

Tencent, a massive tech conglomerate, is known for its social media and entertainment services. It owns WeChat, a widely used messaging app that offers payment services, social media features, and more. Tencent also has investments in gaming, owning major stakes in Riot Games, Epic Games, and Activision Blizzard, as well as interests in financial services and cloud computing.

Baidu, often called China’s Google, is a leading search engine provider. In addition to its search services, Baidu has a strong presence in AI development, autonomous driving, and cloud computing, particularly focusing on natural language processing and autonomous vehicles.

ByteDance, the company behind TikTok, has made a name for itself in short-form video content and AI-driven platforms. It also operates Douyin, the Chinese version of TikTok, along with Toutiao, a popular news aggregation platform. ByteDance has expanded into gaming, e-commerce, and other AI technologies.

Huawei is a global leader in telecommunications equipment and consumer electronics, particularly smartphones and 5G infrastructure. The company is deeply involved in cloud computing and AI, despite facing significant geopolitical challenges.

Xiaomi is a leading smartphone manufacturer that also produces smart home devices, wearables, and a wide range of consumer electronics. The company is growing rapidly in the Internet of Things (IoT) space and AI-driven products.

JD.com, one of China’s largest e-commerce platforms, operates similarly to Alibaba, focusing on direct sales, logistics, and tech solutions. JD.com has also made significant strides in robotics, AI, and logistics technology.

Meituan is best known for its food delivery and local services platform, offering everything from restaurant reservations to hotel bookings. The company also operates in sectors like bike-sharing, travel, and ride-hailing.

Pinduoduo has rapidly grown in e-commerce by focusing on group buying and social commerce, particularly targeting lower-tier cities and rural markets in China. The platform offers discounted products to users who buy in groups.

Didi Chuxing is China’s dominant ride-hailing service, offering various transportation services such as ride-hailing, car rentals, and autonomous driving technology.

But what are the BATX companies we mentioned earlier?

BAXT

The term BATX refers to a group of the four dominant Chinese tech companies: Baidu, Alibaba, Tencent, and Xiaomi. These companies are central to China’s technology landscape and are often compared to the US “FAANG” group (Facebook, Apple, Amazon, Netflix, Google) because of their major influence across a range of industries, including e-commerce, search engines, social media, gaming, ΑΙ and telecommunications. Together, BATX companies are key players in shaping China’s tech ecosystem and have a significant impact on global markets.

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China’s strategy for tech growth

China’s technology development strategy has proven effective in propelling the country to the forefront of several high-tech industries. This ambitious approach, which involves broad investments across both large state-owned enterprises and smaller private startups, has fostered significant innovation and created a competitive business environment. As a result, it has the potential to serve as a model for other countries looking to stimulate tech growth.

A key driver of China’s success is its diverse investment strategy, supported by government-led initiatives like the “Made in China 2025” and the “Thousand Talents Plan“. These programs offer financial backing and attract top talent from around the globe. This inclusive approach has helped China rapidly emerge as a global leader in fields like AI, robotics, and semiconductors. However, critics argue that the strategy may be overly aggressive, potentially stifling competition and innovation.

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Some have raised concerns that China’s government support unfairly favours domestic companies, providing subsidies and other advantages that foreign competitors do not receive. Yet, this type of protectionist approach is not unique to China; other countries have implemented similar strategies to foster the growth of their own industries.

Another critique is that China’s broad investment model may encourage risky ventures and the subsidising of failures, potentially leading to a market that is oversaturated with unprofitable businesses. While this criticism holds merit in some cases, the overall success of China’s strategy in cultivating a dynamic and competitive tech landscape remains evident.

Looking ahead, China’s technology development strategy is likely to continue evolving. As the country strengthens its position on the global stage, it may become more selective in its investments, focusing on firms with the potential for global leadership.

In any case, China’s strategy has shown it can drive innovation and foster growth. Other nations hoping to advance their technological sectors should take note of this model and consider implementing similar policies to enhance their own competitive and innovative business environments.

But under what regulatory framework does Chinese tech policy ultimately operate? How does it affect the whole project? Are there some negative effects of the tight state grip?

China’s regulatory pyramid: Balancing control and consequences

China’s regulatory approach to its booming tech sector is defined by a precarious balance of authority, enforcement, and market response. Angela Zhang, author of High Wire: How China Regulates Big Tech and Governs Its Economy, proposes a “dynamic pyramid model” to explain the system’s intricate dynamics. This model highlights three key features: hierarchy, volatility, and fragility.

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The top-down structure of China’s regulatory system is a hallmark of its hierarchy. Regulatory agencies act based on directives from centralised leadership, creating a paradox. In the absence of clear signals, agencies exhibit inaction, allowing industries to flourish unchecked. Conversely, when leadership calls for stricter oversight, regulators often overreach. A prime example of this is the drastic shift in 2020 when China moved from years of leniency toward its tech giants to implementing sweeping crackdowns on firms like Alibaba and Tencent.

This erratic enforcement underscores the volatility of the system. Chinese tech regulation is characterised by cycles of lax oversight followed by abrupt crackdowns, driven by shifts in political priorities. The 2020 – 2022 crackdown, which involved antitrust investigations and record-breaking fines, sent shockwaves through markets, wiping out billions in market value. While the government eased its stance in 2022, the uncertainty created by such pendulum swings has left investors wary, with many viewing the Chinese market as unpredictable and risky.

Despite its intentions to address pressing issues like antitrust violations and data security, China’s heavy-handed regulatory approach often results in fragility. Rapid interventions can undermine confidence, stifle innovation, and damage the very sectors the government seeks to strengthen. Years of lax oversight exacerbate challenges, leaving regulators with steep issues to address and markets vulnerable to overcorrection.

This model offers a lens into the broader governance dynamics in China. The system’s centralised control and reactive policies aim to maintain stability but often generate unintended economic consequences. As Chinese tech firms look to expand overseas amid domestic challenges, the long-term impact of these regulatory cycles remains uncertain, potentially influencing China’s ability to compete on the global stage.

The battle for tech supremacy between the USA and China

The incoming US President Donald Trump is expected to adopt a more aggressive, unilateral approach to counter China’s technological growth, drawing on his history of quick, broad measures such as tariffs. Under his leadership, the USA is likely to expand export controls and impose tougher sanctions on Chinese tech firms. Trump’s advisors predict a significant push to add more companies to the US Entity List, which restricts US firms from selling to blacklisted companies. His administration might focus on using tariffs (potentially up to 60% on Chinese imports) and export controls to pressure China, even if it strains relations with international allies.

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The escalating tensions have been further complicated by China’s retaliatory actions. In response to US export controls, China has targeted American companies like Micron Technology and imposed its own restrictions on essential materials for chipmaking and electric vehicle production. These moves highlight the interconnectedness of both economies, with the US still reliant on China for critical resources such as rare earth elements, which are vital for both technology and defence.

This intensifying technological conflict reflects broader concerns over data security, military dominance, and leadership in AI and semiconductors. As both nations aim to protect their strategic interests, the tech war is set to continue evolving, with major consequences for global supply chains, innovation, and the international balance of power in technology.

South Korea overtakes Japan as Taiwan’s top trade deficit source

South Korea has become Taiwan’s largest source of trade deficit, surpassing Japan, with a record $18.1 billion deficit in the first 10 months of this year, according to Taiwan’s Ministry of Finance. Integrated circuits account for $12.9 billion, or 71.3%, of the total deficit, driven by South Korea’s dominance in memory chip production and its role in the AI supply chain.

South Korea’s SK hynix, the second-largest memory chip maker, has partnered with Taiwan’s TSMC to produce advanced HBM chips for AI leader NVIDIA, underscoring the countries’ intertwined roles in the tech industry. Taiwan relies on South Korea for DRAM, a key component in packaging and integrating AI technologies, further fueling the deficit.

Trade between the two nations remains robust, with South Korea ranking as Taiwan’s fifth-largest export market and fourth-largest import source. Both export-oriented economies share overlapping industrial structures, particularly in electronics, highlighting their competition and collaboration within global supply chains.

Japan boosts funding for chipmaker Rapidus in semiconductor race

The Japanese government has announced plans to invest an additional 200 billion yen ($1.3 billion) in Rapidus Corp. in fiscal 2025, aiming to enhance the domestic semiconductor industry. This follows a 920 billion yen package already allocated to support the chipmaker, with the added funding expected to attract private-sector investment to strengthen Japan‘s supply chain for next-generation chips.

Rapidus, a venture formed in 2022 by major Japanese companies like Toyota and Sony, estimates it will require around 5 trillion yen to complete a cutting-edge manufacturing plant in Hokkaido. The plant aims to begin mass production of advanced semiconductors by 2027. The project has also secured technical collaboration with United States tech giant IBM, ensuring access to key expertise in chip development.

The government is set to approve a comprehensive financial package that includes the new funding and potential loan guarantees, highlighting its focus on revitalising the once-dominant semiconductor industry. The move aligns with Japan’s strategy to mitigate geopolitical risks and compete in the global chip market, which remains critical for technologies from AI to electric vehicles.

The additional funding underscores Japan’s commitment to regaining a leading position in the semiconductor supply chain amid growing global competition. By fostering public-private partnerships and strengthening technological capabilities, Japan aims to reduce reliance on foreign suppliers and secure its stake in an increasingly vital industry.

US backs GlobalFoundries’ semiconductor growth with $1.5 billion

The US Commerce Department has awarded GlobalFoundries a $1.5 billion subsidy to expand semiconductor production in Malta, New York, and Vermont. This follows the company’s $13 billion commitment to bolstering United States manufacturing over the next decade, with a focus on automotive, AI, and aerospace sectors.

The funding will support enhanced technologies at the Malta facility and plans for a new plant aligned with market demand. New York state has pledged an additional $550 million to support the expansion. Commerce Secretary Gina Raimondo emphasised the urgency to finalise similar agreements before the administration ends.

GlobalFoundries CEO Thomas Caulfield highlighted the critical role of US-made chips in economic and national security. The subsidy is part of the $52.7 billion Chips and Science programme, which also allocated major awards to TSMC, Samsung, and Intel.

Nvidia CEO highlights new AI scaling techniques

Nvidia reported a staggering $19B in net income last quarter but faced questions about sustaining its rapid growth amid shifts in AI development methods. Analysts questioned CEO Jensen Huang on how Nvidia’s position might evolve with trends like ‘test-time scaling,’ a method that enhances AI responses by increasing computing power during inference, the phase when AI generates answers.

Huang described test-time scaling as a groundbreaking development and emphasised Nvidia’s readiness to support it. He noted that while most of the company’s focus remains on pretraining AI models, the growing emphasis on inference could transform the AI landscape. Nvidia’s dominance in pretraining has propelled its stock up 180% this year, but competition in AI inference is heating up, with startups like Groq and Cerebras offering alternative chip solutions.

Despite concerns about diminishing returns from traditional AI scaling, Huang remains optimistic, asserting that foundational AI development continues to advance. He reiterated Nvidia’s advantage as the largest AI inference platform globally, citing the company’s scale and reliability as critical factors in maintaining its edge.

SK Square announces share buyback to boost shareholder value

SK Square, the holding company of AI chipmaker SK Hynix, unveiled plans to enhance shareholder value through a share buyback and other measures. The company will repurchase 100 billion won ($71.51 million) worth of shares within three months and cancel them, following a similar cancellation of shares bought in April.

The move comes after London-based hedge fund Palliser Capital proposed strategies to address SK Square’s undervaluation, with the company’s market value currently less than half the $18 billion worth of its 20% stake in SK Hynix. Palliser, which acquired a 1% stake in SK Square this year, has been in talks with the firm to improve shareholder returns.

This initiative aligns with South Korea‘s “Value-Up” program, designed to encourage companies to increase market value. SK Hynix, a key asset of SK Square, recently reported record profits driven by soaring AI chip demand from Nvidia, adding to the company’s potential for growth.