Tech tensions and costlier iPhones

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Hello everyone, this is Akito from Singapore.

As I watch footage of the Ukraine and Israel-Hamas wars, the controversial aspects of technology become apparent. Electronic components developed for smartphones and other devices that have enriched people’s lives have been used in drones and weapons, surveilling and attacking soldiers.

Tech also allows video from the front lines to be recorded on smartphones and instantly shared worldwide. There is also the possibility that some of these are deep fakes, or synthesised content made using generative AI.

Cutting-edge technology and national security are closely related. A few years ago, I discussed the potential of fuel cell vehicle (FCV) technology with a friend working for a major American auto company. I was sceptical about FCVs, which require substantial infrastructure investments compared to electric vehicles. My friend responded with a thought-provoking question: “Have you ever thought about using it on the battlefield?’”

Fuel cells have the advantage of being much quieter than the massive engines that power existing military vehicles, reducing the possibility of detection by the enemy. They also provide long cruising ranges and can be applied to ships and submarines as well as land vehicles.

As nations become increasingly divided and hostilities break out in various parts of the world, there is no doubt that governments will seek to tighten their control over technology.

The next Huawei?

The Foundation for Defense of Democracies, a conservative Washington-based think-tank, wants the US government to step up its scrutiny of Chinese battery maker CATL, writes Nikkei Asia’s Ken Moriyasu.

In a report, the think-tank urges the government to examine — and potentially limit — the company’s joint ventures and partnerships with American companies, especially in sectors deemed critical to national security. The report cited the battery storage system at US Marine Corps Base Camp Lejeune in North Carolina as an example of how CATL devices have made their way into American infrastructure.

Fujian-based CATL, formally Contemporary Amperex Technology Co. Ltd, is the world’s largest maker of midsize and large batteries for electrified vehicles.

“CATL’s deep ties to America’s electrical grids without stringent oversight is a looming national security blind spot,” Craig Singleton, the report’s author said.

Singleton drew a parallel between CATL and Huawei, the smartphone and telecom equipment maker that has been the target of a US crackdown for years: “Just as Huawei sought control in telecom, CATL is strategically positioning itself to dominate our electric future.”

How Washington will respond to the foundation’s report remains to be seen, but as Huawei’s recent 5G breakthrough has shown, attempting to contain a rising tech company in a key industry can be more complicated than expected.

Stale chips?

The latest set of Washington’s semiconductor export controls poses an “existential challenge” to Chinese artificial intelligence groups, writes the Financial Times’ Qianer Liu, Eleanor Olcott and Ryan McMorrow.

Last week, the Biden administration tightened export controls that will leave Chinese tech groups relying on outdated and stockpiled chips, making training and running their AI models more expensive and inefficient.

Meanwhile, industry giants Alibaba and Baidu face new hurdles in manufacturing their latest self-designed AI processors. The two groups’ processors have become frontrunners in the country’s efforts to create domestic alternatives to US maker Nvidia’s high-end AI chips. But sources told the FT that Baidu and Alibaba will require special permission from the US to get those chips manufactured at Taiwan Semiconductor Manufacturing Co and Samsung fabs.

The new rules will also force Silicon Valley-based Nvidia to halt shipments to China of two processors that the company had tailor-made to comply with earlier export controls.

As one analyst said, “China will be permanently stuck with low-end Nvidia chips and see the [AI] infrastructure gap gradually widen with the rest of the world.”

Through the net

Legal loopholes. Technological ingenuity. Secret shipments. These are just some of the ways China has managed to push ahead with its chip ambitions despite the US clampdown on Huawei and other Chinese tech companies, writes Nikkei Asia’s Cheng Ting-Fang.

One reason sources say the country has managed to keep its chip industry on track is the fact that it has been snapping up semiconductor equipment for years, including from Japan and the Netherlands, which only recently introduced American-style curbs on such exports.

And even with those restrictions in place, there is no guarantee they will be entirely effective. As one industry veteran told Nikkei Asia: “It’s not entirely impossible to use less-advanced tools to make more advanced chips. It’s very difficult to have a clear cut-off on which machine can do what.”

Pricier parts

The production costs for the top-tier model of Apple’s latest iPhone 15 series are more than 10 per cent higher than those of the 2022 flagship phone, marking a record high for the second consecutive year, Nikkei’s Yuki Okoshi and Masaharu Ban write.

A teardown of the 15 Pro Max revealed the components behind its telephoto camera, which supports 5x optical zoom, and a newly designed chipset manufactured using cutting-edge 3-nanometer processing technology. The estimated production cost for the model stood at $558 — a 12 per cent increase from the 14 Pro Max model released in 2022.

By value, 29 per cent of the primary components came from South Korea, a gain of about 5 percentage points for the country. LG Group provides key parts for the telephoto camera, while Samsung Group supplies the display.

The US provided the highest share of primary components at 33 per cent, with Qualcomm and Broadcom supplying communications chips. Japan’s share remained unchanged at 10 per cent.

Any further increases in performance will inevitably mean an increase in costs, according to Fomalhaut Techno Solutions, the company that helped with the teardown. It said Apple had already made all the easier and less expensive improvements it could by 2021.

Suggested reads

1. Beijing weighs delaying approval of $69bn Broadcom-VMware deal (FT)

2. US tells Nvidia to halt shipping some AI chips to China immediately (Nikkei Asia)

3. South-east Asia’s fintechs fill lending gap with data (Nikkei Asia)

4. US chip curbs stymie efforts by China surveillance group to diversify (FT)

5. South Korean Christians turn to AI for prayer (FT)

6. TSMC affiliate eyes Singapore for its most advanced chip plant (Nikkei Asia)

7. China launches investigation into iPhone maker Foxconn, says state media (FT)

8. US groups lobby to refine proposed limits on China investment (FT)

9. Australia’s Canva takes deep dive into AI to help regain valuation (Nikkei Asia)

10. Thailand aims to boost innovation, foster 10,000 new start-ups (Nikkei Asia)