The US government moves to further restrict tech exports to China

October 16, 2023

AI China

The US government is gearing up to roll out additional sanctions to thwart American chipmakers from bypassing export limitations on AI chips destined for China.

The forthcoming amendments, anticipated this week, also target loopholes that previously permitted Chinese firms to procure specialized AI chips through foreign-based branches and distributors.

Building on the comprehensive bans initiated last October, the upcoming regulations will prevent the sale of advanced chipmaking machinery and semiconductors to China.

Confidential sources shared with Reuters that the forthcoming sanctions will target certain AI chips that hover just beneath the present technical benchmarks. In essence, the regulations will extend to chips with slightly diminished capabilities compared to those originally restricted. 

Nvidia shrewdly navigated the former rules by creating a neutered, export-friendly version of its A100 chip, dubbed the A800. In August, Baidu, ByteDance, Tencent, and Alibaba ordered $1 billion in chips to be delivered in 2023, with another $4 billion worth to be delivered next year. This consists of around 100,000 A800 chips for delivery this year.

The new measures underscore the US’s commitment to preventing China from harnessing American tech innovations for military use, especially the geopolitical rift between the two powers.

The US has pursued a policy of curbing China’s tech industry for at least 25 years, but this has accelerated this year, with firms like Microsofting also terminating their research links to Chinese organizations.

There had been signs that the two superpowers had reignited some level of collaboration, but this now seems to be dwindling, with AI igniting a new race for tech superiority. 

US companies such as Google, Microsoft, Meta, and Amazon, and startups like Anthropic and OpenAI are at the forefront of the industry. However, Chinese tech companies are now releasing sophisticated generative AIs to the public, and the country intends to build a competitive AI hardware manufacturing industry over the next few years to reduce its dependence on imports.

A US official, choosing to remain anonymous, conveyed to Reuters that consumer-centric chips, like those in laptops, will remain unaffected by these new regulations. 

The new rules will require companies to inform the government about chips whose performance is below the current performance guidelines before being shipped to China.

In turn, the government will decide on a case-by-case basis whether to permit the transaction. 

Addressing grey areas

In addition to preventing loophole sales of AI chips like the Nvidia A800, the new rules aim to govern the distribution of other types of data center AI chips not covered by existing restrictions. 

Additionally, the existing restrictions inadvertently omitted foreign affiliates of Chinese corporations, inadvertently enabling these chips to find their way into mainland China.

This particularly concerns the Middle East, to which the US allegedly planned to restrict exports, though government officials later denied it.

This comes after investigations earlier in the year revealed how China’s nuclear agency maneuvered existing rules using intermediary firms to source chips for nuclear weapon simulations. 

Restrictions have created an unusual black market in China for high-end AI chips that still enter the country in small quantities. 

These rules don’t just penalize major corporates like Baidu and Tencent – they also affect Chinese startups and smaller businesses looking to build lightweight AI workloads. 

Companies are approaching black market sellers for small orders of high-end Nvidia chips.

The US moves to protect its AI industry

US AI regulations – still largely in formation – have constantly reiterated the importance of bolstering the domestic AI industry. 

The Biden administration is poised to allocate over $52 billion in federal grants and significant tax reliefs to fortify the domestic chip industry. These rules prohibit beneficiaries of federal funding from channeling resources into overseas manufacturing. 

This aims to prevent stimulating chip manufacturing in designated “countries of concern,” namely China, Iran, Russia, and North Korea. 

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Sam Jeans

Sam is a science and technology writer who has worked in various AI startups. When he’s not writing, he can be found reading medical journals or digging through boxes of vinyl records.


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