Nvidia’s board of directors on Thursday announced that Nvidia cofounder Jensen Huang (黃仁勳) would resign as president, CEO and board member, with chief financial officer Colette Kress serving as interim CEO. Although questions surrounding his personal relationships and potential intelligence risks remain under investigation, the political fallout from the episode is already becoming apparent. US House Speaker Mike Johnson bluntly stated that there was growing consensus in Congress on limiting chip exports to China.
Huang had previously been a leading advocate for maintaining access to the Chinese market, arguing that a complete ban would only spur the development of alternative technologies. With one of the most influential lobbyists for continued access to China’s market out of the picture, resistance to tighter export controls in the US Congress could diminish.
However, Washington is concerned not only with where chips are sold, but also with who gets to use their computing power. The National Defense Authorization Act currently under consideration in Congress already includes provisions for chip tracking, oversight of export licensing and restrictions on remote access to computing power, targeting loopholes involving transshipments through third countries and data centers overseas. A chip being located in Singapore or Malaysia does not mean that its computing power is not being used by someone in China. The familiar three-step process for Taiwanese businesses of taking orders, assembling products and clearing customs might soon need a fourth step: end-user investigations. Suppliers who only check shipping addresses without verifying actual end uses might find themselves shut out of the US market.
However, treating a US blockade as a guaranteed success would be equally dangerous. US restrictions on advanced chips increased China’s research and development (R&D) costs, but they have also accelerated the expansion of domestic manufacturers such as Huawei Technologies Co.
Citing data from International Data Corp, Reuters reported that Nvidia’s share of China’s artificial intelligence (AI) chips for data centers fell to 34 percent in the first half of this year. This does not mean that Chinese technology has caught up with that of the US, but it does illustrate that every time the US closes one path, China has greater incentive to find another. If Taiwan views changes in the Chinese market solely in terms of losses for US suppliers, it would overlook the next round of competition over technological standards.
Huang has been known to push the supply chain to bet on new platforms in advance. If his successor adopts a more conservative investment approach, current orders might not necessarily decline, but the way risks are shared in next-generation R&D and capacity expansion could change. Taiwan need not panic. Foxconn Technology said at its investor conference that it still expects AI server rack shipments to grow at a high double-digit rate next year. Taiwan Semiconductor Manufacturing Co’s advanced processes and packaging capabilities, along with Taiwanese manufacturers’ integration of server racks, power supplies, cooling systems and networking equipment would not lose their competitive edge over a single resignation.
However, orders cannot sustain rapid growth indefinitely. Cloud giants would eventually have to calculate the costs of data center electricity, depreciation and returns on investment. Companies such as Google are also expanding their development of in-house chips. The real dividing line of bargaining power would not just be who can deliver on time today, but who gets to shape the power supply, cooling and system specifications tomorrow.
The government and businesses cannot afford to simply wait for Nvidia’s financial forecasts. The government should establish an interagency support mechanism for export controls and end-use verification, so that small and medium-sized suppliers do not have to shoulder national security risks alone.
Meanwhile, Taiwanese companies should diversify their customer base, improve compliance and move beyond manufacturing individual components toward designing entire AI data centers. Setting up factories in the US might be a market-driven decision, but R&D talent, critical technologies and system-level decisionmaking capabilities must remain firmly rooted in Taiwan.
Huang once made Taiwan visible to the rest of the world, but international industries do not operate on sentiment and national security is not a matter of personal relationships. The US seeks to maintain its technological leadership, China wants to break through restrictions and Taiwan cannot rely solely on anyone US business leader to keep the gas pedal pressed. When the businessman sporting a black leather jacket is no longer in the spotlight, yet global consumers still insist on turning to Taiwan — that would be the true measure of Taiwan’s industrial strength.
Liao Ming-hui is an assistant research fellow at the Chung-Hua Institution for Economic Research.
Translated by Kyra Gustavsen
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