US Cuts China Off From AI Chips, As Export Controls Tightened

The United States and President Joe Biden have, as expected, ramped up pressure on China with the announcement that it is tightening the export controls on advanced AI semiconductors.

The US Commerce Department on Tuesday announced the tougher export controls that “strengthens restrictions on advanced computing semiconductors, semiconductor manufacturing equipment, and supercomputing items to countries of concern.”

The move comes approximately one year after the US had announced its sweeping export controls for semiconductor manufacturing equipment and chips to China in October 2022, in an effort counter Beijing’s use of the chips for military applications.

Long expected

The US move has been touted for some time now, ever since June when it was reported that the US was considering clamping down on the computing power export chips can have.

The update seeks to limit access to more chip-making tools in line with Dutch and Japanese rules, and to close some loopholes in export restrictions on artificial intelligence (AI) chips.

Earlier this month the US warned China about the tougher rules as part of a broader bid by the Biden administration to stabilise relations with Beijing.

The outreach to Beijing came after the US in February shot down a Chinese spy balloon flying over America, which sharply escalated tensions.

The Biden administration has also sent a series of high-level officials to China, including Commerce Secretary Gina Raimondo in August.

Additionally, National Security Adviser Jake Sullivan held talks with Chinese Foreign Minister Wang Yi in September.

Export controls

And now the new export controls have been confirmed, which go into effect in 30 days.

Essentially, the new rules restrict a broader swathe of advanced chips and chipmaking tools to a greater number of countries (not just China) including Iran and Russia.

The new measures will also close loopholes in the export controls released last October and will probably be updated on at least an annual basis.

Chip exports can also be restricted to companies headquartered in Macao or anywhere under a US arms embargo, preventing countries of concern from circumventing the controls and providing chips to China.

The updates also introduce new requirements that make it more difficult for China to manufacture advanced chips abroad. The list of manufacturing equipment that falls under the export controls has also been expanded, among other changes to the policy.

The US Department of Commerce’s Bureau of Industry and Security (BIS) said it has released a “package of rules designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses, to arms embargoed countries, including the PRC, and to place additional related entities in the PRC on the Entity List.”

“Today’s updated rules will increase effectiveness of our controls and further shut off pathways to evade our restrictions,” said Secretary of Commerce Gina M. Raimondo. “These controls maintain our clear focus on military applications and confront the threats to our national security posed by the PRC Government’s military-civil fusion strategy.

“As we implement these restrictions, we will keep working to protect our national security by restricting access to critical technologies, vigilantly enforcing our rules, while minimising any unintended impact on trade flows,” said Secretary Raimondo.

“Export controls are a powerful national security tool, and the updates released today build on our ongoing assessment of the US national security and foreign policy concerns that the PRC’s military-civil fusion and military modernization present,” said Under Secretary of Commerce for Industry and Security Alan F. Estevez.

“BIS will continue to assess the security environment and technology landscape and will not hesitate to act as appropriate,” said Estevez.

Closing loopholes

The US said the new rules reinforce the 7 October 2022, controls to restrict the PRC’s ability to both purchase and manufacture certain high-end chips critical for military advantage. It added these updates are necessary to maintain the effectiveness of these controls, close loopholes, and ensure they remain durable.

Specifically, the new controls were “strategically crafted to address, among other concerns, the PRC’s efforts to obtain semiconductor manufacturing equipment essential to producing advanced integrated circuits needed for the next generation of advanced weapon systems, as well as high-end advanced computing semiconductors necessary to enable the development and production of technologies such as artificial intelligence (AI) used in military applications.”

BIS also added to the Entity List two PRC entities (Moore Threads and Biren) and their subsidiaries (a total of 13 entities) “involved in the development of advanced computing chips that have been found to be engaged in activities contrary to US national security and foreign policy interests.”

A spokesperson for the Chinese embassy told Reuters it “firmly opposes” the new restrictions, adding that “arbitrarily placing curbs or forcibly seeking decoupling to serve (a) political agenda violates the principles of market economy and fair competition (and) undermines the international economic and trading order.”

More Chinese reaction in separate article.