Artificial Intelligence (AI) stands at the forefront of the technology supremacy battle between the U.S. and China this year.
On Jan. 26, U.S. Commerce Secretary Gina Raimondo stated in an interview with Reuters that regulations mandating U.S. cloud companies to report foreign customer information for identity verification will be revealed as early as Jan. 29. This move is aimed at preventing China from developing AI models through cloud computing.
The U.S. has been considering controlling cloud services since July last year. Concerns have been raised multiple times that China could still acquire the necessary infrastructure for AI training through cloud services like Amazon, Microsoft, and Google, even without Nvidia’s AI semiconductors. Secretary Raimondo emphasized, “While the U.S. controls the export of AI chips to China, if China bypasses this by using American cloud data centers with AI chips to train their own AI models, what’s the point of the regulation?” This indicates a determination to completely block China’s AI advancement by shutting down the “cloud bypass” in addition to AI semiconductor export sanctions.
The U.S. continues to announce sanctions against China. In October last year, President Joe Biden signed an executive order requiring companies developing AI that could pose a risk to national security, the economy, or safety to share their safety test results with the U.S. government. The U.S. had already expanded export controls, including low-specification AI semiconductors, in its range of sanctions.
If the additional sanctions against China materialize, top global cloud market players like Amazon, Microsoft, and Google are expected to be impacted. These companies have been achieving significant performance in their profitable cloud businesses. Nvidia’s sales in China accounted for a quarter of its total, so it is also facing difficulties in chip sales following the U.S.’s comprehensive sanctions against the country.
The big tech companies, which have been increasing AI infrastructure investments, could see limitations in their cloud businesses if the U.S. government starts controlling customer information under the guise of national security. Microsoft is contemplating closing its Beijing Advanced Research Center, one of its largest hubs in Asia. It is known that some of its technical research staff have already been moved to Canada.
Despite stringent U.S. sanctions, China’s ambition in an “AI rise” seems unwavering. Chinese IT companies' independent AI development is reportedly on track. Over 80% of the Chinese cloud market is already dominated by domestic services like Alibaba, Huawei, Tencent, and Baidu. These companies have started shifting AI chip orders to domestic firms like Huawei or building their own systems in response to U.S. sanctions.
The influence of China’s indigenous AI models is growing. According to the South China Morning Post (SCMP) and others, Samsung Electronics’ Chinese branch recently entered into a strategic partnership with Baidu AI Cloud to implement AI features in the Galaxy S24 series. This includes using Baidu’s Large Language Model (LLM) Ernie to support advanced AI features like “Circle to Search,” which allows users to get search results by drawing a circle on the screen. Baidu’s AI technology will also support text translation, summarization, and AI assistant functions.
The Galaxy S24 series is equipped with Samsung’s own generative AI “Gauss” and Google’s Gemini and Imagen. However, due to restrictions by Chinese authorities, Google and OpenAI’s AI models cannot be used in mainland China.