Washington

The Biden administration on Tuesay unveiled a series of measures aimed at curbing the export of advanced artificial intelligence (AI) chips and chipmaking tools, primarily intended to prevent China from obtaining cutting-edge U.S. technologies, particularly for military applications. According to Reuters, these measures, scheduled to take effect in 30 days, also extend restrictions to a broader array of countries, including Iran and Russia. Additionally, the new rules blacklist Chinese chip designers Moore Threads and Biren. 

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Commerce Department Secretary Gina Raimondo emphasised that the goal is to limit China's access to "advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to (Chinese) military applications." She explained that the administration's goal was not to hurt China's economy by pointing out that the nation will continue to import semiconductors worth billions of dollars from the US. In response, a spokesperson for the Chinese embassy expressed firm opposition to the new restrictions, stating that they violated principles of fair competition and undermined international economic and trading order. 

The release of these new measures underscores the challenges faced by the Biden administration in restricting the flow of advanced chips and chipmaking tools into China, as concerns grow over the role of U.S. technology in strengthening China's military capabilities. Reuters cited a report by Georgetown University's Centre for Security and Emerging Technology which revealed that out of 97 individual AI chips procured by Chinese military tenders in 2020, nearly all were designed by companies including Nvidia, Xilinx, Intel, and Microsemi. AI capabilities, driven by advanced chips, supercomputing, and cutting-edge technology, play a vital role in enhancing military decision-making, planning, and logistics. 

While these new regulations aim to halt certain chips' shipment to China, Nvidia, a top U.S. AI chip designer, expressed compliance with the rules and did not anticipate a significant impact on its short-term results. Nvidia's business has thrived since the imposition of previous regulations, as its China-only chips continued to outperform alternatives. The company is currently grappling with high demand that exceeds supply. However, in the long term, it could face challenges as Chinese chip companies seek alternatives to U.S. firms. Nvidia's shares fell by 3.7 per cent, and other AI chipmakers, including AMD and Intel, also experienced declines in their stock prices. The new rules, while exempting most consumer chips used in devices such as laptops, smartphones, and gaming, will subject some to licensing and notification requirements by U.S. officials.  

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The previous regulations incorporated a two-pronged test that evaluated both a chip's computing performance and its ability to communicate with other chips, a significant factor in AI supercomputers. Nvidia and Intel developed specialised chips tailored for the Chinese market to retain powerful computing capabilities while limiting communication speeds to adhere to the prior rules. The new regulations introduce limits on the computing power that a chip can pack into a certain size, with the intention of preventing workarounds involving new "chiplet" technology, which China has identified as crucial to its semiconductor industry's future.  

Chinese startups Biren and Moore Threads, founded by former Nvidia employees, are directly impacted by the new measures. Both companies will face rigorous licensing requirements before U.S. suppliers can ship products to them. In response, Biren expressed strong opposition to its blacklisting and intends to appeal the decision, while Moore Threads strongly disagreed with its addition to the trade blacklist.  

Furthermore, these measures expand licensing requirements for exports of advanced chips to over 40 additional countries, particularly those presenting risks of diversion to China and subject to U.S. arms embargoes. Additionally, the rules restrict chips from being sent to units of companies headquartered in China, Macau, and other arms embargoed countries, regardless of their global location. The administration also applied licensing requirements for chipmaking tools to 21 countries outside China, concerned about potential equipment diversion to China and other national security considerations.  

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Meanwhile, the semiconductor industry is closely monitoring the impact of these new rules. The Semiconductor Industry Association stressed the importance of working with allies, as broad, unilateral controls could potentially harm the U.S. semiconductor ecosystem without significantly advancing national security. 

(Inputs from Reuters) 

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