China’s SMIC achieves 5nm chip production using ASML DUV machines while startups like DeepSeek develop ultra-efficient AI models, as US tightens sanctions delaying Nvidia’s China-specific AI GPUs.
President Xi Jinping’s April 30 Politburo call for AI-military integration coincides with SMIC’s 5nm breakthrough using non-EUV equipment, revealing China’s multi-pronged strategy to bypass Western semiconductor restrictions.
SMIC’s Sanctions-Defying 5nm Breakthrough
Semiconductor Manufacturing International Corporation (SMIC) began mass-producing 5nm chips in May 2024 using ASML deep ultraviolet (DUV) lithography machines, as reported by Digitimes on 10 May. This achievement comes despite 2023 US bans on exporting extreme ultraviolet (EUV) equipment to China. Analysts note the process requires multiple patterning techniques, increasing production costs by 40% compared to EUV methods.
US Tightens Nvidia GPU Restrictions
The US Commerce Department expanded export controls on 7 May, specifically delaying Nvidia’s China-tailored H20 AI GPU launch to Q3 2024. ETtech reported on 8 May that Chinese cloud providers are stockpiling existing chips, with Alibaba confirming ‘contingency inventories’ through 2025.
China’s $47.5B Chip Fund Prioritizes RISC-V
Beijing launched its third semiconductor investment fund on 12 May, focusing on RISC-V open-source architectures to circumvent Western intellectual property barriers. State planner officials told AFP this aligns with Xi’s ‘new productive forces’ doctrine emphasizing civil-military AI integration.
DeepSeek’s Cost-Efficient AI Models
Hangzhou-based DeepSeek unveiled its R1 chatbot on 9 May, claiming GPT-4-level performance at 80% lower operational costs. The 10-billion-parameter model uses dynamic token allocation, enabling faster inference speeds for Chinese language tasks. CEO Li Zhiming stated: ‘Efficiency breakthroughs matter more than raw compute power in the sanctions era.’
Historical context: The 2019 US blacklisting of Huawei prompted China’s first major semiconductor self-reliance push, with SMIC developing 14nm nodes by 2021. Meanwhile, RISC-V adoption grew 300% in China since 2022 amid x86/ARM licensing uncertainties. Parallels emerge with Japan’s 1980s ‘Fifth Generation Computer Systems’ project, which prioritized AI hardware before shifting focus due to commercial pressures.
Industry precedent: China’s ‘Big Fund’ raised $138B across prior phases (2014-2019), though 2022 corruption probes revealed $9B in misallocated investments. Current transparency measures require provincial governments to match 30% of federal semiconductor funding. The EU is drafting similar legislation to monitor dual-use AI exports, mirroring 2023 US-China chip war dynamics.
