China Lashes Out As US Tightens Chip Export Controls

The widely expected decision by the United States to toughen its export controls of advanced semiconductors to China and other nations, has drawn a response from Beijing.

China’s foreign ministry issued a rebuke against the US chip curbs on Wednesday, after the Biden administration published new measures to further restrict Beijing’s access to cutting-edge technologies.

Meanwhile the US export restrictions will also financially impact American firms such as AMD, Intel and Nvidia, which export high end AI chips to overseas markets. Their exports to certain countries are now likely to be restricted under the new rules.

China response

The US Commerce Department on Tuesday had announced its plans to halt shipments to China of more advanced artificial intelligence chips designed by Nvidia and others.

It also restricted an expanded swathe of advanced chips and chipmaking tools to a greater number of countries including Iran and Russia, and blacklisted Chinese chip designers Moore Threads and Biren (which are well-funded Chinese startups founded by Nvidia veterans).

However chips used in phones, video games and electric vehicles were purposefully excluded from the new rules, according to senior administration officials.

But China is not at all happy at the move.

“Such restrictions and forced de-coupling for political purposes violate the principles of the market economy and fair competition,” the Chinese foreign ministry said in a response to Reuters’ questions.

“The US needs to stop politicizing and weaponising trade and tech issues and stop destabilising global industrial and supply chains,” spokesperson Mao Ning was quoted by CNN as telling a press briefing. “We will closely follow the developments and firmly safeguard our rights and interests.”

The US meanwhile has said it does not want to block China’s economic development, and China hopes the US will adhere to this rather than saying one thing and doing another, it said.

There are concerns that China will retaliate – and could add to the measures it has already implemented previous to US export controls.

In July for example China ordered export restrictions on two elements critical for manufacturing semiconductors and communications equipment, namely gallium and germanium.

Tech response

The US decision to further restrict China’s access to AI chips, comes after companies including Nvidia and Intel had introduced graphics processing units (GPUs) for AI processing tasks that complied with last year’s sanctions, while delivering capabilities comparable to top-of-the-line processors.

Nvidia in May for example had released a slower version of its flagship H100 GPU for the Chinese market, called the H800, that complied with the restrictions, including a reduced interconnect speed.

Intel did the same, releasing a version of its Gaudi2 GPU for the Chinese market in June.

But now in a regulatory filing Nvidia confirmed that the new US export restrictions will block sales of two high-end artificial intelligence chips it created for the Chinese market – A800 and H800. It said that one of its gaming chips will also be blocked.

“The Interim Final Rule amends ECCN 3A090 and 4A090 and imposes additional licensing requirements for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of the Company’s integrated circuits exceeding certain performance thresholds (including but not limited to the A100, A800, H100, H800, L40, L40S, and RTX 4090),” it stated in the filing.

However Nvidia said that “given the strength of demand for our products worldwide, we do not anticipate that the additional restrictions will have a near-term meaningful impact on our financial results.”

Overly broad

The Semiconductor Industry Association, which represents 99 percent of the US semiconductor industry, said in a statement that the new measures are “overly broad”.

“We are evaluating the impact of the updated export controls on the US semiconductor industry,” it said. “We recognise the need to protect national security and believe maintaining a healthy US semiconductor industry is an essential component to achieving that goal.”

“Overly broad, unilateral controls risk harming the US semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere,” it added. “Accordingly, we urge the administration to strengthen coordination with allies to ensure a level playing field for all companies.”

Tech lifeline?

However Reuters also reported that the Biden administration’s sweeping new rules also quietly threw Nvidia, Intel and Advanced Micro Devices a potential lifeline to preserve lucrative business in one of the world’s biggest chip markets.

Buried deep in more than 400 pages of rules issued on Tuesday, officials at the US Bureau of Industry and Security (BIS) said they are open to the semiconductor industry’s input for finding ways to keep sending AI chips to China for small and medium-sized systems.

Reuters reported that the other primary gift that US officials gave Nvidia, Intel and AMD was hobbling their most capable Chinese competitors.

New rules will make it nearly impossible for Moore Threads and Biren to have their designs manufactured using cutting-edge chipmaking technology.

That means whatever Nvidia is able to sell to China will likely be Chinese buyers’ best legal option, Reuters noted.