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Biden expands restrictions on Nvidia chips beyond China, includes other nations

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Biden expands restrictions on Nvidia chips beyond China, includes other nations

Biden Administration to Restrict AI Chip Shipments to China

Introduction

The Biden administration plans to implement new measures to halt shipments of advanced artificial intelligence (AI) chips to China. The move aims to prevent Beijing from acquiring cutting-edge U.S. technologies that could enhance its military capabilities. These restrictions will also apply to other countries such as Iran and Russia, and will be regularly updated to address evolving threats and loopholes.

Objective and Impact

The primary objective behind these measures is to limit China’s access to advanced semiconductors that could potentially advance its military applications, particularly in the field of AI. The administration emphasizes that its intention is not to harm China’s economy, as the country will still be able to import a significant amount of U.S. semiconductors.

However, the Chinese embassy expressed strong opposition to these new restrictions, stating that they violate the principles of fair competition and undermine the international economic and trading order.

Concerns and Findings

The Biden administration’s decision reflects growing concerns about the role of U.S. technology in modernizing China’s military. Georgetown University’s Center for Security and Emerging Technology found that a majority of AI chips procured via Chinese military tenders were designed by companies such as Nvidia, Xilinx, Intel, and Microsemi. These AI capabilities, supported by advanced chips and supercomputing, significantly enhance military decision-making, planning, and logistics.

Impact on Chip Designers

Top U.S. AI chip designer Nvidia, which complies with the regulations, does not anticipate any significant negative impact in the short term. However, in the long run, as Chinese chip firms seek alternatives to fill any void left by U.S. companies, Nvidia and other chipmakers may face challenges. AMD, another affected company, plans a similar strategy to continue its operations.

Following the announcement of the new rules, Nvidia’s shares fell 3.7%, while AMD and Intel experienced smaller declines.

New Rules and Licensing Requirements

The new rules exempt most consumer chips used in laptops, smartphones, and gaming from restrictions. However, certain licensing and notification requirements will apply to some consumer chips. The previous rules imposed limitations on computing performance and chip communication, prompting Nvidia and Intel to create special chips for the Chinese market that complied with those regulations. The new rules now focus on the amount of computing power packed into a chip, aiming to prevent workarounds using new “chiplet” technology.

Additionally, the new measures expand licensing requirements for exports of advanced chips to over 40 additional countries, which pose risks of diversion to China. The Biden administration also introduced licensing requirements for chipmaking tools in 21 countries outside of China.

Industry Response and Outlook

The Semiconductor Industry Association is currently evaluating the impact of these new rules and urges the administration to collaborate with allies. While the restrictions may affect the regional distribution of system sales, companies like ASML do not anticipate a material impact on their financial outlook for 2023 and beyond. Other U.S. equipment makers, such as Lam Research and Applied Materials, expect limited long-term effects.

The effectiveness of these measures remains to be seen as the Biden administration works to balance national security concerns and the global semiconductor ecosystem.