US Introduces Further Restrictions on Chipsets to Limit China's Access

Friday - October 20 2023, 11:44 UTC - 1 year ago

The US administration has introduced further regulations to limit China's access to advanced chipsets made in the US. Companies have been prohibited from selling specific chips used in supercomputing and AI to Chinese corporations. Nvidia, the world's most valuable chipmaker, was prevented from sending two of its most sophisticated AI chips to Chinese clients, but quickly created other variations for the Chinese market that were less powerful. Such export limitations are necessary to ensure that China does not use such advanced chipsets to manufacture weapons that may specifically target the US's cybersecurity initiatives. The worsening trade relations between the two superpowers has led China to restrict the export of two strategic materials in the semiconductor industry. US exports to China have lagged behind imports for China since 2020.

The US administration has gone forward with its objective of limiting China's access to advanced chipsets made in the country by introducing further regulations. A year back, the US announced new laws prohibiting companies operating out of its soil from selling specific chips used in supercomputing and AI to Chinese corporations. The limitations also targeted foreign enterprises that utilize US equipment .

The Western superpower is engaged in an arms race with its Eastern counterpart, and such curbs are designed to limit the use of such cutting-edge semiconductors for military uses. According to information accessed initially by Reuters, chips intended for consumer items such as laptop computers would be excluded from the new tariffs. Corporations must notify the Commerce Department when processing orders for the most potent consumer chips to ensure they are not utilized in ways that endanger national security .

Plugging loopholesThe new updates to the rule were necessitated as many firms found a way to bypass the restrictions on exporting such chipsets. Nvidia, the world's most valuable chipmaker, was prevented from sending two of its most sophisticated AI chips to Chinese clients last year, processors that have become the industry standard for building chatbots and other AI systems. However, Nvidia quickly created other variations for the Chinese market that were less complex and circumvented US export limits .

The H800 processor, for example, has the same computational capability as the company's more powerful but banned H100 device at particular settings used in AI work. Nvidia has now released a filing saying that the new export limitations will prevent the sale of two high-end AI processors explicitly designed for the Chinese market, the A800 and H800. It also stated that one of its gaming chips will be disabled .

China accounts for up to 25% of its data center chip sales income. The US has maintained that such curbs are required to ensure that China does not use such advanced chipsets to manufacture weapons that may specifically target the country's cybersecurity initiatives. China has responded by alleging that the US restriction is intended to suppress its firms from advancing their businesses. "The US needs to stop politicizing and weaponizing trade and tech issues and destabilizing global industrial and supply chains .

We will closely follow the developments and firmly safeguard our rights and interests," Mao Ning, China's foreign ministry spokesperson, said.Worsening trade relationsThe relationship between the superpowers is hitting new lows after the trade war seen under the leadership of President Trump in 2018-19. In retaliation to the US curbs on chipsets last year, China restricted exports of two strategic materials in the semiconductor industry, gallium and germanium .

Over the years, China has been moving some of its foreign-goods imports away from the United States. Both are concerned that the other side may suddenly weaponize trade flows, cutting off imports or exports in the name of security. According to statistics from 2022, US exports are lagging behind imports for China.