TikTok seeks a deal and China brings a chip 'shock'

Hello from sunny California. Is it just me or have the first two months of 2025 seemed both incredibly long but also to have passed by in the blink of an eye? The tech world has gone through so much upheaval in just a short few weeks, but if I had to summarize the year so far into two keywords, it would be: DeepSeek and Trump.

The Chinese AI developer DeepSeek kick-started worldwide debates around open-source AI and spending on AI infrastructure. The company's low-cost model has been quickly adopted across China's public and private sectors, and perhaps just as quickly been labeled a "national security risk" and shunned in the West.

While U.S. tech companies might have to recalculate how much they should spend on AI and how much they will make from it because of DeepSeek, their CEOs don't seem to hold any grudges against the startup.

On Wednesday, Nvidia's Jensen Huang joined a long list of executives praising DeepSeek's innovation, saying "nearly every AI developer" is using the open-sourced DeepSeek R1 model to improve model reasoning. This, he argues, will not slow demand for his company's AI chips but actually drive sales further.

Meanwhile, Trump started his second term as president with a series of tariffs and negotiations with world leaders that sent shock waves through global trade and tech supply chains. He is also gunning for the CHIPS Act and other Biden-era policies, including export controls, leaving tech companies waiting nervously for any changes.

As one semiconductor executive told me, not getting the CHIPS Act funding is the least of their concerns right now. The real question on everyone's mind is: What else does Trump want?

Deal or no deal?

As busy as Trump seems to be planning his next tariff target (the EU being the latest on the list), he still finds time for social media, and not just Truth Social, but also the Gen Z favorite platform TikTok.

The president has tasked Vice President JD Vance and national security adviser Mike Waltz with leading discussions with TikTok on how to resolve the sell-or-ban situation. TikTok and its parent company ByteDance are still against selling the app outright but are now open to the idea of U.S. backers owning a larger share of it, Nikkei Asia's Yifan Yu and Cissy Zhou report.

No deal is finalized and key issues, such as ownership of TikTok's algorithms, are unresolved. But Beijing has also appeared to soften its stance and would not object to American investors owning more of the app, as long as the algorithms remain in ByteDance's control.

TikTok still has a long way to go to win the trust of Washington. Meanwhile, the company is taking the ax to its trust and safety team, with layoffs in the U.S., Europe and Asia as it steps up efforts in AI deployment.

Yielding results

Huawei has significantly improved the amount of advanced artificial intelligence chips it can produce, in a key breakthrough that supports China's push to create its own advanced semiconductors, write the Financial Times' Zijing Wu and Eleanor Olcott.

The Chinese conglomerate has increased the "yield" -- the percentage of functional chips made on its production line -- of its latest 910C AI chips to close to 40%, according to two people with knowledge of the matter. That represents a doubling from 20% about a year ago.

The improved yield means that Huawei's production line for Ascend chips has become profitable for the first time, according to the people. The company has a goal to further improve yields to 60%, in line with the industry standard for similar chips.

The advance is a step forward for China's hopes to build computing infrastructure that can support its burgeoning AI industry, despite U.S. export controls designed to hamper the country's ability to develop sensitive technologies.

Still, Nvidia is expected to sell more AI chips in China than Huawei, despite the U.S. company only being able to sell Chinese customers its H20 chips, a less powerful version of its H100 chips designed to adhere to Washington export controls.

Huawei declined to comment.

Old chips, new players

A "China shock" is coming for the chip industry as the country's aggressive expansion in older semiconductors and niche substrates drives prices down to previously unthinkable levels.

The country's share in the mature chip market is rapidly rising as China ramps up efforts to build a domestic supply chain in areas not yet targeted by U.S. export curbs, Nikkei Asia's Cheng Ting-Fang and Lauly Li write. Its mature chip capacity will account for about 28% of the global market in 2025, according to IDC estimates, and industry association SEMI says that figure could grow to 39% by 2027.

One analyst warned that the chip industry must brace for the same kind of "China shock" that hit the solar power industry when China began mass-producing panels.

The draw of AI

Chinese animated film "NeZha 2" has taken the global box office by storm, beating "Inside Out 2" to become the highest-grossing animated film in history. Thanks to AI, you might hear a lot more about 2-D entertainment from China in the years to come.

One-year-old Chinese startup Miguo AI is planning to release 100 comic and cartoon titles this year, using artificial intelligence to create images faster and more cheaply, Nikkei Asia's Wataru Suzuki reports.

"If one day of work creating a weekly comic took 14 people to complete, we can do the same amount of work with 5.5 people," Chen Dazhi, chief operating officer of Miguo, said in an interview.

While AI can help bring costs down, it is still unclear how they will be received by fans. A 2022 survey found that more respondents held negative views about manga generated by AI than those who were positive about it, and that 43% were not willing to pay for AI manga.

Welcome to the Tech Latest podcast. Hosted by our tech coverage veterans, Katey Creel and Akito Tanaka, every Tuesday we deliver the hottest trends and news from the sector.

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