New U.S. Regulations Offer Lifeline to Tech Giants Amidst China AI Chip Restrictions

Nvidia, Intel, and AMD refrained from commenting on these developments, with Nvidia's shares experiencing a 4.67% decline following the announcement of the new regulations.

In a move aimed at restricting China’s access to critical U.S. artificial intelligence chips, the Biden administration has introduced extensive new regulations, which also inadvertently offer a lifeline to Nvidia, Intel, and Advanced Micro Devices (AMD) to sustain their lucrative business in one of the world’s largest chip markets.

Nestled within a hefty 400-page document of regulations released on Tuesday, the U.S. Bureau of Industry and Security (BIS) quietly signaled its willingness to consider input from the semiconductor industry on how to continue supplying AI chips to China for use in small and medium-sized systems.

The primary objective of these rules was to curtail China’s capacity to leverage American chips in constructing massive supercomputers, which could be applied in various areas, including technologies similar to OpenAI’s ChatGPT and military applications, according to officials.

Thomas Krueger, a former U.S. National Security Council export control official, emphasized that the overarching goal of these rules was to focus on capabilities that could empower Chinese military systems, not broad consumer applications.

The U.S. authorities have solicited suggestions for creating a “tamperproof” method to prevent the aggregation of up to 256 AI chips into supercomputers.

This approach aims to restrict controlled AI chips from being used for training large dual-use AI models with potentially concerning capabilities while permitting AI training on a smaller scale.

Notably, Nvidia, Intel, and AMD refrained from commenting on these developments, with Nvidia’s shares experiencing a 4.67% decline following the announcement of the new regulations.

Another significant benefit for Nvidia, Intel, and AMD arising from these rules is the hindrance they pose to their formidable Chinese competitors, Moore Threads and Biren.

These startups, founded by former Nvidia personnel, are now likely to face substantial obstacles in having their designs manufactured using cutting-edge chipmaking technology.

Consequently, whatever Nvidia can offer to China might be the most viable legal option for Chinese buyers.

As part of the newly published rules set to take effect in 30 days, U.S. officials have specifically targeted Chinese chip manufacturers by imposing restrictions on the export of advanced chipmaking equipment known as immersion deep ultraviolet (DUV) lithography machines, if they contain any American components.

TechInsights analyst Dan Hutcheson explained that these new rules essentially close off potential future developments, aiming to “future-proof the document.”

Although DUV machines are not produced by American manufacturers, they are manufactured by Japan’s Nikon and the Netherlands’ ASML.

These DUV rules align with diplomatic efforts by the U.S., Japan, and the Netherlands to implement similar controls on exporting these machines to China.

While DUV machines may not produce cutting-edge chips, they come close and may have been employed by Huawei’s chip manufacturing partners to create a new smartphone chip for its Mate 60 Pro, as per analysts.

This control could significantly limit China’s ability to expand advanced node semiconductor manufacturing for years, potentially degrading its existing advanced node manufacturing facilities if spare parts and components can be effectively controlled.

By narrowing down the specific equipment subject to restrictions, the new rules allow toolmakers to continue selling equipment designed for older chip technologies without running afoul of government regulations, as explained by David Kanter, President of Real World Insights.