Biden’s Strategic Move: Restricting China’s Access to Nvidia Chips and Extending Curbs to Global Frontiers

The Biden administration is set to halt shipments of advanced artificial intelligence chips to China, as part of a series of measures to prevent Beijing from receiving advanced U.S. technologies to strengthen its military. The rules, set to take effect in 30 days, restrict a wider range of advanced chips and chipmaking tools to countries like Iran and Russia and blacklist Chinese chip designers Moore Threads and Biren.

The aim is to limit China’s access to advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers critical to Chinese military applications. China will still import billions of dollars worth of U.S. semiconductors. A Chinese embassy spokesperson firmly opposes the new restrictions, stating that arbitrarily placing curbs or forcibly seeking to decouple to serve a political agenda violates market economy principles and fair competition. The new measures show the Biden administration’s struggle to slow the flow of chips and chipmaking tools into China, despite concerns over the role U.S. technology is playing in modernizing Beijing’s military.

Georgetown University’s Center for Security and Emerging Technology reported that out of 97 AI chips procured via Chinese military tenders in 2020, nearly all were designed by Nvidia, Xilinx, Intel, and Microsemi. The regulations released Tuesday aim to improve the speed and accuracy of military decision-making, planning, and logistics. Top US AI chip designer Nvidia complied with the rules and did not expect a significant impact on near-term results.

Nvidia’s business has grown since last year’s rules, as its China-only chips are superior. New rules will exempt most consumer chips in laptops, smartphones, and gaming, with some subject to U.S. licensing and notification requirements. The rules measure computing performance and communication ability.

Nvidia and Intel have introduced new rules limiting the computing power a chip can pack into a certain size to prevent workarounds using new “chiplet” technology. This move is designed to prevent workarounds using new “chiplet” technology that China believes will be central to its semiconductor industry’s future. Chinese startups Biren and Moore Threads, founded by former Nvidia employees, will face a tough licensing requirement before shipping products to them.

The new measures also expand licensing requirements for exports of advanced chips to over 40 additional countries that present risks of diversion to China and are subject to U.S. arms embargoes. Chips will not be sent to global firms if their parent companies are based in China, Macau, or other arms-embargoed countries.

The Biden administration has hit 21 countries outside China with licensing requirements for chipmaking tools, including some deep ultraviolet (DUV) lithography systems. Although DUV is less advanced than state-of-the-art extreme ultraviolet equipment (EUV), it can make chips nearly as advanced at a greater cost. ASML, a US semiconductor equipment manufacturer, has announced new measures aimed at reducing the regional split of its system sales. The company said these measures would likely impact its financial outlook for 2023 or the longer term.

However, it did not expect a significant impact on its financial outlook for 2023 or the longer term. The Semiconductor Industry Association is evaluating the impact of the new rules and urged the administration to work with allies. The company said that overly broad, unilateral controls risk harming the US semiconductor ecosystem without advancing national security. The Semiconductor Industry Association has not immediately responded to requests for comment.

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