Biden cuts China off from more Nvidia chips, further ramping up sanctions

The Biden administration plans to block shipments to China of more advanced artificial intelligence chips designed by Nvidia and others, part of a raft of measures released Tuesday to give Beijing the latest to bolster its military. Americans want to stop getting technology.

The rules, which take effect in 30 days, restrict the latest chips and chipmaking tools to several countries, including Iran and Russia, and blacklist Chinese chip designers MoreThreads and Brain.

Commerce Department Secretary Gina Raimondo told reporters late Monday that the new measures close loopholes in regulations issued last October and will likely be updated “at least annually.”

The aim is to “restrict China’s access to advanced semiconductors that can provide breakthroughs in artificial intelligence and sophisticated computers critical to (Chinese) military applications,” he stressed. That the administration is not trying to hurt Beijing economically.

He said that China will still import $100 billion worth of American semiconductors.

A Chinese embassy spokesman said it “strongly opposes” the new restrictions, adding that “imposing restrictions arbitrarily or (a) attempting to forcibly de-couple the market to serve a political agenda” violates the principles of economy and fair competition (and) harms the international economy. trade order.”

The report found that the USAI feeds China’s military

The new moves show the Biden administration is struggling to slow the flow of chips and chip-making equipment to China, even as concerns grow over the role of American technology in modernizing Beijing’s military.

Reuters reported in June that AI chips banned by earlier regulations could be bought from vendors in Shenzhen, China.

A June 2022 report by Georgetown University’s Center for Security and Emerging Technologies found that nearly all of the 97 individual AI chips purchased through Chinese military tenders during an 8-month period in 2020 were made by Nvidia, Xilinx, Intel and Microsemi. were designed. .

According to the regulations released on Tuesday, AI capabilities, with the help of supercomputing and advanced chips, improve the speed and accuracy of military decision-making, planning and logistics.

Only China Chips hit

In a statement after the rules were published, top US AI chip designer Nvidia said it complies with the rules and doesn’t expect a meaningful hit to near-term results.

Nvidia’s business has grown since last year’s implementation of the rules because its China-only chips still outperform alternatives. The firm is currently selling almost every chip it can buy as global supply outstrips demand, but it will suffer in the long run as Chinese chip firms fill any gap left by American companies. Find somewhere else to fill.

The company made chips like the A800 and H800 that operated under the previous rules to continue selling to China, and AMD, which has been hit by the rules, has said it plans a similar strategy.

Shares of Nvidia fell 3.7%, while shares of AMD and another rival AI chipmaker, Intel, fell 0.6% and 1%, respectively.

The new rules would exempt most consumer chips used in laptops, smartphones and gaming, although some would be subject to licensing and notification requirements from US authorities.

Using chiplet technology

Previous rules imposed a two-pronged test that measured both a chip’s computing performance and its ability to communicate with other chips, a key step in AI supercomputers where thousands of chips are linked together. Goes to crunch a large amount of data.

Nvidia and Intel created special chips for the Chinese market that retained powerful computing capabilities but limited communication speeds to stay within previous norms.

The new rules restrict how much computing power a chip can pack into a given size, a move designed to curb work using the new “chiplet” technology that is about China has said that its semiconductor industry will be the center of the future.

Chinese companies Brain and MoreThreads, whose U.S. suppliers will now face strict licensing requirements before shipping products, are both startups founded by former Nvidia employees and are aiming to take on the U.S. AI chip giant. to compete with.

Brain said he strongly opposes its blacklisting and will urge the US government to reconsider the decision. MoreThreads said it strongly disagrees with its addition to the commercial blacklist.

Extension of Licensing

The new measures also increase licensing requirements for exports of advanced chips to more than 40 additional countries that pose risks of diversion to China and are subject to US arms embargoes.

The move appears to build on a letter Nvidia received in August that described it as restricting shipments of its A100 and H100 chips beyond China to other regions, including some countries in the Middle East. Is.

The chips will be barred from being shipped to units of firms located anywhere in the world if their parent companies are headquartered in China, Macau and other arms embargo countries, confirming a Reuters report.

The Biden administration also targeted 21 countries outside of China with licensing requirements for chip-making equipment, amid concerns that the equipment could be diverted to China and other national security concerns.

It also added some deep ultraviolet (DUV) lithography systems to the list of equipment banned from entering the country, which sent ASML of the Netherlands old DUV models and spare parts to some modern Chinese chip factories. Exceeds current Dutch regulations to prevent sending Confirming another report from Reuters.

DUV is less advanced chipmaking equipment than the latest extreme ultraviolet equipment (EUV), which has already been banned from China, but it can make chips nearly as advanced at a higher cost.

ASML said in a statement that the new measures would likely impact “the regional distribution of our system sales” in the medium to long term, but the company did not expect to see a “material impact” on its 2023 financial outlook. or long term.

Shares in rival US equipment maker Lam Research were flat, while Applied Materials fell 0.6% and KLA lost 1.3%.

“We do not think the increased restrictions on semiconductor equipment will have significant long-term impacts on equipment suppliers,” Wolff Research said in a note to clients.

The KLA declined to comment. Lam and Applied did not immediately respond to requests for comment.

Chinese counterparts were warned the rules were coming by Raimondo, national security adviser Jack Sullivan and Treasury Secretary Janet Yellen, U.S. officials said, confirming a Reuters report.

The Semiconductor Industry Association said in a statement that it is “assessing the impact” of the new rules and urged the administration to work with unions. “Overly broad, unilateral control risks harming the U.S. semiconductor ecosystem without advancing national security,” the group said.