The US is preparing to tighten the ban on the export of chips for AI systems to China

The administration of US President Joe Biden is considering imposing new restrictions on exports to China of artificial intelligence (AI) chips that can be used in military technology in the near future. This was reported by The Wall Street Journal and the Financial Times, citing sources.

As early as July, the US Department of Commerce may ban the supply of chips, in particular from Nvidia and AMD, to customers in China and “other countries that are of concern to Washington,” without special licenses.

Accelerators created using technologies of American origin may fall under the new restrictions. This measure will be another part of the rules expanding export control measures that were announced by the United States in the fall of 2022. Among the formal reasons for the new restrictions cited by sources are American fears that China could use such chips to develop weapons and hacker attacks. “AI-equipped weapons could give US rivals an advantage on the battlefield, and AI tools could be used to create chemical weapons or malicious computer code,” sources said.

Shares of Nvidia after the publication of this news fell by 3%, and AMD – by 2.4%. At the same time, all interested parties in the United States declined to comment.

Now in Washington, they are also discussing a ban on the rental of cloud resources by Chinese AI companies, which helped them bypass sanctions. At the same time, the timing of the introduction of the ban will depend on the development of the political situation, according to representatives of the US administration. Most likely, this will not happen until at least US Treasury Secretary Janet Yellen’s visit to Beijing, which is scheduled for early July.

In September 2022, it became known that the Biden administration was imposing restrictions on the export to Russia and China of a number of graphics processing units (GPU) manufactured by Nvidia and AMD, which are used in supercomputing and AI technologies. In particular, it was about chips A100 and H100 Nvidia and MI250 AMD. In November, Reuters wrote that Nvidia then had to develop new A800 and H800 GPUs specifically for China in order to fully comply with US export control rules. Now they may also be under the threat of an export ban.

Nvidia CEO Jensen Huang previously told the Financial Times that existing export controls could do “tremendous damage” to the US tech industry. Moreover, he said that as a result of the imposed export bans, Nvidia found itself with its “hands tied behind its back.”

In 2023, Tencent, Alibaba, Baidu, ByteDance and other Chinese tech giants placed additional orders for Nvidia chips due to the rapid development of generative AI technologies in China. And in this race, the country has significant success – China Science Daily believes that the smart chat bot from Baidu Ernie Bot 3.5 is comprehensively superior to ChatGPT 3.5 and even ChatGPT 4.0 in terms of working with Chinese.

New US sanctions will not be able to undermine China’s ambitions in the field of AI, but they will negatively affect its capabilities, says Sergey Lukonin, head of the China Economics and Politics Sector at the Center for Asia-Pacific Studies at IMEMO RAS. At the very least, the export ban will slow down China’s new achievements in the field of AI, since Nvidia is the leading manufacturer of such chips. Most likely, China is already developing its own analogues, but the question remains how long it will take to reach full scale production.

Now the PRC is trying to circumvent the existing bans in the field of semiconductors in several ways at once, which, for example, is evidenced by the May visit to the Netherlands by Vice Chairman Han Zheng of the PRC, the expert adds, the country where the equipment for the production of chips is produced. In addition, Beijing stimulates the attraction of foreign investment in production, hoping that technologies will come to the country along with them, Lukonin said. The United States is hitting on several fronts at once, banning both the chips themselves and the equipment for their production, the expert recalls. China may, in the scenario described in the media, resort to new retaliatory measures, as was the case in May with the restriction of purchases from the American chip manufacturer Micron, Lukonin concludes.

Nvidia engineers have big doubts about the correctness of the Biden administration’s actions, given that the company itself depends on Chinese rare earth metals, says Alexei Maslov, director of ISAA MSU. The company is afraid of retaliatory measures, which can be expected, he adds. The PRC can already now replace some of the American products in this industry with its own, Maslov adds, and the gray market is not disappearing anywhere either. Washington’s goal, which it now sets for itself, is to slow down the growth of Chinese technology at least a little, Maslov believes, since otherwise it will reach the American level in a few years.