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US Announces Crackdown on Export of AI Chips to China

2 mins
Updated by Geraint Price
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In Brief

  • The US Commerce Department has revised its export rules for American AI chips to limit China's threat to US national security.
  • The new rules, most of which become effective in 30 days, will reduce US exports of fast AI chips used in Chinese data centers.
  • USA President Joe Biden wants to ameliorate US-Chinese tensions when he meets Chinese President Xi Jinping in the coming weeks.
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The US Commerce Department has introduced new chip restrictions to limit Chinese access to American semiconductors. Chipmakers will require a license to ship advanced semiconductors to regions under US arms embargoes.

The restrictions will not apply to chips used in consumer electronics like smartphones, laptops, and gaming devices. The rules are set to become effective in 30 days.

US AI Firms Say China Exports Help Revenues

The curbs are intended to thwart the advancement of China’s military might, especially in light of advancements in artificial intelligence (AI). The US fears advanced chips in Chinese hands could empower more devastating weapons and military strategies that threaten US national security.

Read more: 18 Best AI Productivity Tools in 2023

Companies must notify the government when exporting chips with speeds of more than 300 teraflops, devices capable of 300 trillion highly precise calculations per second. The government will allow the export of chips between 150 and 300 teraflops only if they can perform fewer than 370 billion calculations per square millimeter.

The new restrictions come after American companies had found ways to workaround export controls tabled by the Biden administration last year. US companies Nvidia, Intel, and Qualcomm have protested that the restrictions would hurt the revenues needed to build factories in the US.

For example, 20-25% of Nvidia’s data center revenue comes from China, which includes AI-focused chips like the A800 and H800 and other non-AI devices. These chips can be used to train AI models but are less powerful than their American counterparts.

Nvidia’s stock was down 7.5% after the US announcement but has since recovered.

Read more: ChatGPT Review: Everything You Need to Know

Taiwan’s Role in the AI Chip Market

Nvidia’s CEO, Jensen Huang, said the company is unlikely to see the impact of these new restrictions on its near-term results. The company offers software tools and chips to speed up AI development and is currently one of the world’s most valuable companies.

“Given the demand worldwide for our products, we don’t expect a near-term meaningful impact on our financial results,” Huang said.

But its potential Achilles heel could be its reliance on Taiwan Semiconductor Manufacturing Company (TSMC), one of the few firms with equipment and expertise capable of manufacturing Nvidia’s latest AI chips. Apple’s new iPhone 15 also relies on TSMC, one of the few companies capable of a three nanometer (three billionths of a meter) manufacturing process.

US AI Export China, Taiwan Companies' Market Share
Taiwanese companies dominate semiconductor industry | Source: Council on Foreign Relations

US President Joe Biden, who is looking to improve relations with Chinese President Xi Jinping in the coming weeks, has vowed to defend Taiwan if China launches a military offensive.

Do you have something to say about new US AI export rules for China, the role of Taiwan in the AI industry, or anything else? Please write to us or join the discussion on our Telegram channel. You can also catch us on TikTokFacebook, or X (Twitter).

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...