Commerce Department unveils export controls meant to cut off China’s AI industry

“Artificial Intelligence is probably the most obvious example of the kind of transformational technology that we have to assess and control,” Raimondo said. “It’s true that AI has the potential for huge societal benefit. But it also can do tremendous and profound harm if it’s in the wrong hands and in the wrong militaries.”

The Biden administration wants to limit China’s access to some critical technologies to try to prevent the country from catching up with Silicon Valley, even as it has sought to steady relations with China — the United States’ largest trade partner — in other areas. Advanced chips — the brains of cutting-edge computing systems including large language models and other advanced AI applications — are a focus of the Washington export controls.

One of the new rules “prevents the workaround of simply purchasing a larger number of smaller datacenter AI chips which, if combined, would be equally powerful as restricted chips,” the Commerce Department’s Bureau of Industry and Security said in its update.

The bureau also tightened export of advanced chips to countries deemed to have a higher risk of letting the technology travel onward to China, imposed controls on more types of chipmaking tools and introduced a long list of other technical tweaks to strengthen the measures.

The new rules are notably expected to impact Santa Clara, Calif.-based Nvidia, the leading supplier of chips for training advanced AI models and the sixth-most-valuable company in the world. Nvidia had previously been allowed to ship slower lines of AI chips to China, but these are also expected to be blocked from sale to China without an exemption.

“We comply with all applicable regulations while working to provide products that support thousands of applications across many different industries,” the company said in a statement. “Given the demand worldwide for our products, we don’t expect a near-term meaningful impact on our financial results.”

The new controls represent a highly anticipated update to the Biden administration’s chip export rules for China, which were announced a year ago and had been the administration’s most aggressive measures. Yet some in Washington called for heavier oversight, saying advanced U.S. chipmaking technology was still filtering to China through loopholes.

Calls to tighten the controls grew louder after Chinese tech giant Huawei Technologies unveiled a smartphone last month that contained a domestically manufactured 5G seven-nanometer chip — an advanced brain that the U.S. export controls were meant to prevent China from making.

Administration officials acknowledged that it would be difficult to prevent the Chinese military from accessing the advanced technology without broader ramifications for the nation’s economy.

“Now I can’t say that there’s not going to be some slowdown in Chinese capability around artificial intelligence at that high level that could possibly be used for goodness,” a senior administration official said, speaking on the condition of anonymity in a briefing ahead of the announcement. “But we have to focus on the national security implications there. Large language model applications or military applications can be very risky for the United States and its allies.”

Mao Ning, a Chinese Foreign Ministry spokesperson, criticized the prospect of tighter U.S. chip restrictions on Monday and said China would safeguard its interests. “The U.S. needs to stop politicizing and weaponizing trade and tech issues,” she said.

The United States dominates the global chip industry, with Nvidia as the world’s leader in AI chips, Qualcomm the top vendor of smartphone processors, and Intel the strongest developer of PC chips. China is investing heavily in an effort to narrow the gap. Analysts say Huawei makes the best Chinese alternative to Nvidia’s AI-training chips, though its production scale has been limited.

Huawei Rotating Chairman Eric Xu said in a speech in 2018 that the company believed AI would be a new “general purpose technology,” joining the ranks of the wheel, electricity, automobiles and the internet as technologies that fundamentally transformed humanity, with broad spillover effects. Western economists have previously posited 25 general purpose technologies.

Xu said in the speech that cheaper, abundant access to computing power was a necessity for rapid advancement in AI, and the limits of this supply were a key factor restricting the pace of its development. “At the current technical level, it takes days or months to train complex models,” he said.

The Commerce Department’s new rules drew criticism from the U.S. semiconductor industry, with executives warning that the tightened rules could intensify China’s resolve to build alternatives to U.S. technology.

“Overly broad, unilateral controls risk harming the U.S. semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere,” the Washington-based Semiconductor Industry Association said in a statement.