The Biden administration stepped up its efforts to block Beijing’s access to advanced semiconductor technology with a slew of new rules, including curbs on the sale of Nvidia Corp. chips designed specifically for the Chinese market.
The latest regulations also restrict exports to two Chinese artificial-intelligence chip firms that are seen as rivals to U.S.-based Nvidia. The rules — aimed at preventing China from accessing cutting-edge technology with military uses — cast a cloud over U.S. chip stocks on Tuesday.
Nvidia fell as much as 7.8%, its biggest intraday decline since December. The stock had more than tripled this year before the pullback, fueled by the artificial intelligence boom. The company makes the most popular AI accelerators, processors that help sophisticated algorithms handle massive amounts of data.
The tighter controls will target Nvidia’s A800 and H800 chips, a senior U.S. official said, which the American firm created for export to China — the world’s largest market for chips — after the Biden administration introduced its initial restrictions last October.
“We comply with all applicable regulations while working to provide products that support thousands of applications across many different industries,” an Nvidia spokesperson said in an emailed statement. “Given the demand worldwide for our products, we don’t expect a near-term meaningful impact on our financial results.”
The Biden administration also added two Chinese AI chip startups — Shanghai Biren Intelligent Technology Co. and Moore Threads Intelligent Technology Beijing Co. — and their subsidiaries to a trade restriction list that mandates companies to obtain a U.S. government license before shipping to those firms.
Biren said that it’s strongly opposed to the ruling and has urged the Commerce Department to review its decision. Chinese Foreign Ministry spokeswoman Mao Ning said Monday at a regular press briefing in Beijing that her nation opposed “the U.S. politicizing, instrumentalizing and weaponizing trade and tech issues.”
The new rules also require companies to notify the U.S. government before selling chips that fall below the controlled threshold, as Bloomberg reported earlier. Top-of-the-line chips are best for powering artificial intelligence models, a senior administration official said. But with a lot of money and a little jury-rigging, a whole class of slightly inferior chips could also be used for AI and supercomputing and therefore pose a national security risk, the official said.
The U.S. wants to monitor that so-called gray zone activity, the official added, while declining to comment on the specific parameters of which chips will be affected. The administration will review company notifications within 25 days, the official said, to determine whether firms need a license to sell those chips to China.
“It’s difficult to draw a bright line between military and commercial technology,” U.S. Commerce Secretary Gina Raimondo told reporters ahead of publication of the rule. “There are often dual-use technologies — and the same technologies that fuel commercial exchange, unfortunately, sometimes can also allow our competitors to modernize their military, surveil their citizens and solidify oppression.”
But the U.S. doesn’t want to be more restrictive than necessary, Raimondo said, emphasizing a consistent message from the Biden administration that Washington doesn’t seek to hurt China’s economy.
Washington relented in one key area following a year of public comment on the initial rule: The updated curbs broadly allow the sale of advanced commercial chips to Chinese companies for use in consumer products like smartphones, computers and electric vehicles, as Bloomberg reported earlier. But the Biden administration will restrict the most advanced consumer chips — like those used in AI data centers — and impose a notification process on a select number of varieties just behind the cutting edge.
The administration will also require firms to obtain a license to sell chips to more than 40 countries that Chinese firms could use as intermediaries to skirt U.S. controls.
The U.S. is also expanding the scope of manufacturing gear subject to restrictions, said senior administration officials, without specifying the exact equipment. Asked whether the U.S. would restrict less advanced DUV machines, which are mainly supplied by Dutch chip equipment leader ASML Holding NV, an administration official said that Washington has worked with the Netherlands on the policy.
ASML’s chief executive officer publicly opposed the initial U.S. restrictions, and it took months before the U.S. was able to get its key allies in Amsterdam and Tokyo on board.
The new regulations will be applicable to a “limited number” of ASML fabs in China related to advanced semiconductor manufacturing, the firm said in a statement, without saying which machines will be impacted.
“These export control measures will likely have an impact on the regional split of our systems sales in the medium to long term,” ASML said. “However, we do not expect these measures to have a material impact on our financial outlook for 2023 and for our longer-term scenarios.”
The updated rules won’t include restrictions on access to U.S. or allied cloud computing services, though the administration will issue a request for comment to better understand potential national security risks associated with this access — and options to potentially address them.
“Overly broad, unilateral controls risk harming the U.S. semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere,” said industry group Semiconductor Industry Association, which represents Nvidia and major U.S. equipment suppliers including Applied Materials Inc.
“Accordingly, we urge the administration to strengthen coordination with allies to ensure a level playing field for all companies,” the group added.
