OpenAI has severed its tie with China, blocking rival Chinese developers and users from accessing its services and tools beginning July 9.

In a June interview with Bloomberg, the leading artificial intelligence (AI) firm first announced its plan to restrict access in China to its large language model (LLM), saying, “We are taking additional steps to block API traffic from regions where we do not support access to OpenAI’s services.”

However, OpenAI is yet to release a statement elaborating its reason for the abrupt decision.

ChatGPT, OpenAI’s trademark AI model, is officially unavailable in China as the government has blocked the technology in its firewall. Despite that, developers could go around this restriction by using virtual private networks (VPN) to use OpenAI’s tools in designing and fine-tuning their generative AI models. Well, that was true until this week.

The Widening Rift between US and China

The recent move from the American AI company came after the United States halted the export of some advanced semiconductors to China. These products are used to fabricate chips necessary for training AI models, which has set back China’s progress in enhancing its technology.

According to the Center of Safe Artificial General Intelligence, both tactics have “caused significant concern within China’s AI community” since they raise “questions about equitable access to AI technologies globally.”

Meanwhile, Zhu Feida, an associate professor from Singapore Management University, emphasized that AI training is not only determined by its processing chip but also by the stability of the energy supply. As automated technologies rapidly grow, the concern for their high power consumption also increases, making energy supply a significant limiting factor for AI development.

He believed that China had an advantage in this area due to its new power generation innovations and supply chain for battery energy storage.

“Although China currently cannot compete with the US when it comes to AI computing power, it is only a matter of time and an accumulation of experience before it catches up. China’s advantage in new energy power generation will be increasingly prominent in the coming stages of AI development; there could be a situation where the strengths of each cancel the other out,” Feida added.

Blessing in Disguise?

While the latest block may have substantial implications for the AI industry in China, domestic AI companies were quick to see the opportunity in the situation.

Many Chinese LLM developers have announced promotions, cut prices, and offered other services to lure OpenAI’s previous customers to their business. Baidu rolled out 50m free tokens for its Ernie 3.5 AI model, including free migration services, whereas Zhipu AI matched this offer with 150m free tokens. Tencent Cloud did not also let the chance slide and gave away 100m free tokens for its first-time users until the end of July.

“Competitors are offering migration pathways for former OpenAI users, seeing this as an opportunity to expand their user base,” said Fieda.

Nevertheless, several local businesses already experienced hassles because of US limitations on China’s AI landscape. Recently, online video company Kuaishou was forced to limit the accessibility of its text-to-video AI model, Kling, due to low computing power. Moreover, reports indicate that the hidden market for US semiconductors has become in demand as companies scramble to adapt to the restrictions.