China's Baidu is shrugging off US chip export restrictions

A Baidu sign at the World Artificial Intelligence Conference in Shanghai, September 2022
A Baidu sign at the World Artificial Intelligence Conference in Shanghai, September 2022

It’s been a tough year for tech companies. The S&P China Tech 50 Index is down nearly 36% this year. The Nasdaq-100 Technology Sector Index is down by almost the identical percentage.

But amid this gloom, China’s Baidu is sounding a cautiously upbeat note about its prospects.

Read more

The search engine giant just delivered a surprise revenue gain in the third quarter, with sales rising to 32.5 billion yuan ($4.6 billion), handily beating analyst forecasts of 31.8 billion yuan. Baidu share prices rose over 3.5% following the earnings report.

Baidu isn’t worried about US chip export curbs

One reason for Baidu’s optimism may be its assessment that it doesn’t have much to fear from the new export restrictions that the US imposed on advanced semiconductors. Those curbs, published last month by the White House, are aimed at hobbling China’s access to the equipment and software needed to make high-end chips with military uses.

Baidu’s response, at least for now, is: Pfft.

In an earnings call yesterday (Nov. 22), Robin Li, Baidu’s CEO, said that his company’s cloud computing and artificial intelligence business “[do] not rely too much on the high advanced chips.”

Where such chips are needed, Baidu can tap its stockpile of supplies in the near term, turn to alternatives that offer “almost the same effectiveness and efficiency” in the medium term, and develop its own AI chip in the longer term, Li said. He added that Baidu’s autonomous vehicle development won’t be disrupted, because vehicle chips aren’t currently included under US export restrictions.

The US chip restrictions have even “increased some good market opportunities for the Chinese chip companies and...our AI business will eventually benefit from these opportunities,” Li said.

Where Baidu delivered a surprise sales gain, the Chinese smartphone maker Xiaomi posted a surprise slump. Sales of smartphones sank by 11% in the third quarter, dragging revenue down by 10% over the same period.

China’s covid situation was a big drag on business, Wang Xiang, the president of Xiaomi, told reporters on a conference call. “The challenge in China is covid, the pandemic situation is still volatile,” he said, according to Bloomberg.

More from Quartz

Sign up for Quartz's Newsletter. For the latest news, Facebook, Twitter and Instagram.

Click here to read the full article.