DeepSeek's 'Sputnik Moment' Exposes Holes in US Chip Curbs

Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration
Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration
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DeepSeek's 'Sputnik Moment' Exposes Holes in US Chip Curbs

Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration
Deepseek and Microsoft logos are seen in this illustration taken, January 28, 2025. REUTERS/Dado Ruvic/Illustration

US export controls on high-tech chips may have inadvertently fueled the success of start-up DeepSeek's AI chatbot, sparking fears in Washington there could be little it can do to stop China in the push for global dominance in AI.

The firm, based in the eastern Chinese city of Hangzhou, has stunned investors and industry insiders with its R1 program, which can match its American competitors seemingly at a fraction of the cost.

That's despite a strict US regime prohibiting Chinese firms from accessing the kinds of advanced chips needed to power the massive learning models used to develop AI.

DeepSeek founder Liang Wenfeng has admitted the "embargo on high-end chips" has proved a major hurdle in its work.

But while the curbs have long aimed to ensure US tech dominance, analysts suggest they may have spurred the firm to develop clever ways to overcome them.

The company has said it used the less-advanced H800 chips -- permitted for export to China until late 2023 -- to power its large learning model.

"The constraints on China's access to chips forced the DeepSeek team to train more efficient models that could still be competitive without huge compute training costs," George Washington University's Jeffrey Ding told AFP.

The success of DeepSeek, he said, showed "US export controls are ineffective at preventing other countries from developing frontier models".

"History tells us it is impossible to bottle up a general-purpose technology like artificial intelligence."

DeepSeek is far from the first Chinese firm forced to innovate in this way: tech giant Huawei has roared back into profit in recent years after reorienting its business to address US sanctions.

But it is the first to spark such panic in Silicon Valley and Washington.

Venture capitalist Marc Andreessen described it as a "Sputnik moment" -- a reference to the Soviet satellite launch that exposed the yawning technology gap between the United States and its primary geopolitical adversary.

Fraction of the cost

For years many had assumed US supremacy in AI was a given, with the field dominated by big Silicon Valley names like OpenAI and Facebook-parent Meta.

While China has invested millions and vowed to be the world leader in AI technology by 2030, its offerings were hardly enough to raise hackles across the Pacific.

Tech giant Baidu's attempt at matching ChatGPT, Ernie Bot, failed to impress on release -- seemingly confirming views among many that Beijing's stifling regulatory environment for big tech would prevent any real innovation.

That was combined with a tough regime, spearheaded by the administration of Joe Biden, aimed at limiting Chinese purchases of the high-tech chips needed to power AI large language models.

But DeepSeek has blown many of those ideas out of the water.

"It's overturned the long-held assumptions that many had about the computation power, the data processing that's required to innovate," Samm Sacks, a Research Scholar in Law and Senior Fellow at Yale Law School's Paul Tsai China Center, told AFP.

"And so the question is can we get cutting-edge AI at a fraction of the cost and a fraction of the computation?"

While DeepSeek's model emphasized cost-cutting and efficiency, American policy towards AI has long been based on assumptions about scale.

"Throw more and more computing power and performance at the problem to achieve better and better performance," according to George Washington University's Ding.

That's the central idea behind President Donald Trump's Stargate venture, a $500 billion initiative to build infrastructure for artificial intelligence led by Japanese giant SoftBank and ChatGPT-maker OpenAI.

But the success of DeepSeek's R1 chatbot -- which its developers claim was built for just $5.6 million -- suggest innovation can come much cheaper.

Some urge caution, stressing the firm's cost-saving measures might not be quite so innovative.

"DeepSeek V3's training costs, while competitive, fall within historical efficiency trends," Lennart Heim, an associate information scientist at the RAND Corporation, told AFP, referring to R1's previous iteration.

"AI models have consistently become cheaper to train over time -- this isn't new," he explained.

"We also don't see the full cost picture of infrastructure, research, and development."

'Wake-up call'

Nevertheless, Trump has described DeepSeek as a "wake-up call" for Silicon Valley that they needed to be "laser-focused on competing to win".

Former US Representative Mark Kennedy told AFP that DeepSeek's success "does not undermine the effectiveness of export controls moving forward".

Washington could choose to fire the next salvo by "expanding restrictions on AI chips" and increased oversight of precisely what technology Chinese firms can access, he added.

But it could also look to bolster its own industry, said Kennedy, who is now Director of the Wilson Center's Wahba Institute for Strategic Competition.

"Given the limitations of purely defensive measures, it may also ramp up domestic AI investment, strengthen alliances, and refine policies to ensure it maintains leadership without unintentionally driving more nations toward China's AI ecosystem," he said.

Rebecca Arcesati, an analyst at Mercator Institute for China Studies (MERICS), told AFP "the very real fear of falling behind China could now catalyze that push".



Apple Launches Low-Cost iPhone 16e, Taking AI Features to Lower Price Points

An Apple logo adorns the facade of the downtown Brooklyn Apple store on March 14, 2020, in New York. (AP)
An Apple logo adorns the facade of the downtown Brooklyn Apple store on March 14, 2020, in New York. (AP)
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Apple Launches Low-Cost iPhone 16e, Taking AI Features to Lower Price Points

An Apple logo adorns the facade of the downtown Brooklyn Apple store on March 14, 2020, in New York. (AP)
An Apple logo adorns the facade of the downtown Brooklyn Apple store on March 14, 2020, in New York. (AP)

Apple launched its latest low-cost model, dubbed the iPhone 16e, on Wednesday as it looks to grab a bigger share of the mid-range smartphone market and fend off competition from rivals such as Samsung and China's Huawei.

The new phone, which leaves behind the SE naming convention for Apple's budget series, will take on popular Android smartphones at a time when consumer electronics makers are looking to add artificial intelligence tools to their devices.

Priced at $599, the iPhone 16e will have enough computing power to run Apple Intelligence, the set of features that includes integrated access to ChatGPT.

Apple late last month forecast strong sales growth signaling that it will recover from a dip in iPhone sales as it rolls out artificial intelligence features to more regions and languages.

However, analysts have been cautious about the sales boost such tools could provide as the AI features are set to be launched in phases in some regions on its latest iPhone 16 line-up and the iPhone 15 Pro model.

The sales of SE model as a share of total revenue for iPhones has dropped from 10% from its introduction in 2016 to about 1% last year, according to Counterpoint Research.

"Apple can use the lower-end phone in markets where Android phones have higher share without losing too much on the higher-priced iPhones," said Gil Luria, analyst at DA Davidson.

The iPhone 16e will be powered by the A18 chip used in more expensive models launched in September last year and will support Apple Intelligence out of the box.

It will be about $200 less expensive than the cheapest version of iPhone 16, launched in September.

The iPhone 16e will also be the first device from Apple to feature the C1 chip, which is the first modem designed in house for cellular connectivity, a shift from chips made by Qualcomm .

The new device's camera system will have a 48 megapixel sensor and two lenses, one of which will be a two times zoom lens integrated into the primary camera.

Previous SE models were known for their smaller screen size and attracted a niche group of buyers, but the latest generation comes with a 6.1 inch display, the same as the least expensive iPhone 16 model.

This year's much-anticipated update brings a change to its slab-design, nixing the physical home button and introducing Apple's FaceID feature.

Apple said the iPhone 16e will be available for pre-order in 59 countries, including the US, China and India from February 21, with shipments starting from February 28.

The SE model would be the last among iPhones to adopt the USB Type-C port for charging, leaving behind Apple's proprietary Lightning connector and letting it return to the European Union market.

Apple had discontinued the third-generation SE model and iPhone 14 in the EU as the products did not conform with local laws requiring USB Type-C charging standard.