The DeepSeek Shockwave: Is the global AI capital steadily shifting to China?
In one of the most dramatic shifts in the tech industry, the recent release of DeepSeek's R1, an open-source artificial intelligence (AI) reasoning model, sent shockwaves through the US tech giants, wiping more than $1 trillion off the markets. Stalwarts like Nvidia witnessed stock drops by as much as $500 billion (17 percent). The DeepSeek model, originating from a small Hangzhou-based startup, was developed at a fraction of the cost incurred by its US counterparts like OpenAI. This event signifies China's growing prowess in AI, challenging Western tech giants' long-standing dominance.
Despite stringent US export restrictions on advanced technologies, Chinese inventors showed tenacity and resilience in the burgeoning AI landscape. Companies like Huawei and YMTC underscore China's progress towards creating faster and more efficient chips. This steady climb emphasises how they circumvent Washington's restrictions by fostering high domestic productivity and innovation. The critical question is: are US export restrictions futile, merely strengthening Beijing's resolve to upend US tech dominance, similar to the development of its global satellite navigation system BeiDou?
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DeepSeek's stunning cost efficiency starkly contrasts the exorbitant expenditures typically associated with US tech giants. This comes as welcome news when the conventional AI models are so power-hungry and require so much water to keep them cool that their sustainability is a concern, questioning the high-cost models and their long-term viability in a marketplace increasingly influenced by cost-efficient solutions. China's strategic focus on AI and related technologies has also made significant progress across various domains, from natural language processing to autonomous vehicles.
As the efficacy of the export controls is being questioned, evidence suggests mixed results. On the one hand, DeepSeek's accomplishment demonstrates that stringent measures do not entirely curtail innovation and may instead stimulate more. Conversely, the United States's steadfast imposition of export controls underscores the intimate relationship between national security and technological supremacy. The efficacy of these measures is further complicated by the global nature of talent migration, which sees leading experts from the West moving to China.
China's allure isn't limited to technological advancements but extends to attracting top-tier talent from all over. For instance, leading cancer scientist Sun Shao-Cong returned to China amid US investigations, while French Nobel-winning laser scientist Gérard Mourou joined China's top university. Additionally, respected mathematician Kenji Fukaya left the US for China's Tsinghua University, and award-winning mathematician Ma Xiaonan departed Europe for China. Other notable examples include prominent British physicist Prof Zhang Yonghao, who joined China's national hypersonic laboratory in Beijing, and global climate expert Chen Deliang, who returned to China after decades in Europe. Award-winning mathematician Wang Xujia also returned to China after a long career in Australia. These moves highlight a significant trend: China's growing attractiveness as a cutting-edge research and innovation hub.
The journey to build advanced semiconductor chips without ASML's state-of-the-art extreme ultraviolet (EUV) lithography machines exemplifies China's inventive spirit. Chinese scientists are pioneering alternative methods that bypass these restrictions. One breakthrough involves the laser-induced discharge plasma (LDP) method, a process that generates EUV light using laser vaporisation of tin and high-voltage discharge. This innovation, spearheaded by Prof Zhao Yongpeng at the Harbin Institute of Technology, is cost-effective and energy-efficient. The strategic collaborations with institutions like the Shanghai Institute of Optics and Tsinghua University further enhance these efforts.
Additionally, Chinese companies are leveraging deep ultraviolet (DUV) lithography machines to make sophisticated chips. Techniques such as self-aligned quadruple patterning (SAQP) allow for the etching of lines on silicon wafers multiple times, increasing transistor density and chip performance. This approach underscores Chinese innovation and highlights the country's determination to overcome import dependencies and US-imposed restrictions.
China's recent successful space missions, such as the Chang'e 5 lunar sample return and the Tianwen-1 Mars mission, undeniably showcase the country's burgeoning capabilities in advanced chip production and other related technologies. These complex endeavours require sophisticated autonomous navigation and control systems, advanced image recognition for terrain mapping and object identification, and real-time data analysis to adapt to unforeseen circumstances. The successful execution of these missions demonstrates Beijing's mastery of AI-powered robotics, machine learning, and deep learning technologies, solidifying its position as a leading force in the global AI landscape.
So, the question is: are we witnessing a steady shift of the global AI capital to China?
Washington would hate to see that happen, as President Donald Trump has allocated $500 billion to AI research and development to ensure continued US dominance in the AI arena. This only follows his predecessor's tactics without giving it strategic thought. The Biden administration had made the race for chip manufacturing a top priority by offering $53 billion to the industry. Four years later, his Commerce Secretary Gina Raimondo said, "Trying to hold China back is a fool's errand." That gamble failed. Will President Trump's work?
Dr Sayeed Ahmed is a consulting engineer and the CEO of Bayside Analytix, a technology-focused strategy and management consulting organisation.
Views expressed in this article are the author's own.
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