Analysis Intel's investment arm might be forced to divest interests in China due to incoming US regulations governing American funds going to Chinese tech companies. The chipmaker is one of the biggest such investors, despite receiving billions from Washington to boost semiconductor production efforts at home.

According to the Financial Times, Intel Capital is one of the most prolific foreign investors into artificial intelligence and silicon startups in China, owning a stake in 43 fledgling companies in the country, and this may have pushed the US into bringing in investment restrictions.

Intel has continued to invest in China despite the growing tensions between Washington and Beijing over technology, with the US seeking to contain the Middle Kingdom's advances in AI and advanced semiconductors over fears they could be put to use by the country's military.

However, the Biden administration announced new measures in June intended to crack down on American venture funding for Chinese technology companies, and this could force Intel Capital to divest many of the investments it currently holds.

The regulations, expected to be finalized later this year, aim to ban any US investment dollars from going to Chinese companies that are developing semiconductors, quantum computers, or AI systems, the New York Times reported.

According to a source quoted by the FT, Intel Capital's investments were "the poster children that helped build consensus for the outbound restrictions."

We asked both Intel and Intel Capital for comment.

Recent activity by Chipzilla involves participation in a fundraising round by Shenzhen-based AI-Link, while Intel Capital led the funding round for a company called North Ocean Photonics based in Shanghai.

But it isn't just Intel's venture capital arm; last year the Santa Clara chip biz itself announced the opening of a semiconductor innovation hub in the city of Shenzhen in southern China, intended to focus on AI, chip development and edge computing.

This is all very odd when the Biden administration is leaning heavily on its allies to do more to counter Beijing's technology advances, such as by discouraging companies in their countries from doing business with Chinese companies.

Dutch chipmaking equipment biz ASML is one example. It has faced restrictions on selling to Chinese companies, and even been pressured to stop servicing kit it has already sold there.

Some might suspect that the US government has been deliberately soft on its own vested interests, especially as Nikkei Asia reported recently that US-based rivals of ASML such as Applied Materials and Lam Research are reliant on China for more than 40 percent of their revenue.

Intel has been vocal in its opposition to Chinese sanctions, with chief exec Pat Gelsinger recently complaining that these measures were squandering market opportunities for technology companies like his.

Earlier this year, the semiconductor giant was awarded $8.5 billion in direct funding and up to $11 billion in loans from the US government under the CHIPS and Science Act, in order to help American chip manufacturing better compete against rivals such as China.

Although Washington's contribution is only a fraction of the $100 billion Intel plans to sink into new semiconductor facilities on US soil, the Department of Commerce said it still stands out as one of the largest awards ever announced in US semiconductor manufacturing. ®

https://www.theregister.com//2024/07/16/intels_china_investments_may_have/