The Biden administration’s extensive new regulations quietly gave Nvidia (NVDA.O), Intel (INTC.O), and Advanced Micro Devices (AMD) (AMD.O) a chance to maintain lucrative business in one of the largest chip markets while denying China access to critical American artificial intelligence chips.
Officials at the U.S. Bureau of Sector and Security (BIS) stated they are open to suggestions from the semiconductor sector for methods to keep delivering AI chips to China for small and medium-sized systems. Still, they were buried in more than 400 pages of guidelines released on Tuesday.
According to authorities, the regulations were designed to prevent China from using American chips to build large supercomputers that might be used to develop technologies like OpenAI’s ChatGPT and for military objectives.
According to Thomas Krueger, a former export control officer for the U.S. National Security Council, the organizational idea for all these regulations is to keep them concentrated on those capabilities that potentially support Chinese military systems. They have no desire to pursue widespread consumer applications. They are working quite hard to thread that needle.
U.S. government representatives sought advice on creating a “tamperproof” method to prevent systems containing up to 256 AI chips from being connected to a supercomputer.
“This approach could constrain (controlled AI chips) from being used to train large dual-use AI foundation models with capabilities of concern, while allowing AI training capabilities at a small or medium scale,” according to the BIS.
Intel, AMD, and Nvidia all declined to comment. The new guidelines were revealed on Tuesday, so Nvidia stock ended the day down 4.67%.
Nvidia, Intel, and AMD’s most capable Chinese rivals were hindered, which was the second major present provided by U.S. politicians to these companies.
Moore Threads and Biren, two well-funded Chinese firms created by former Nvidia employees, won’t be able to use state-of-the-art chip manufacturing technologies to produce their designs due to new regulations.
That implies that whatever Nvidia can provide Chinese consumers will probably be their best legal alternative.
According to investment firm Piper Sandler analysts, “Nvidia will quickly redesign a chip to meet new standards with relatively immaterial disruptions to the current business outlook.”
TIGHTER RULES FOR TOOLS
U.S. authorities targeted China’s chip producers with the new regulations, which were issued on Tuesday and go into effect in 30 days, by limiting the export of sophisticated chipmaking machinery known as immersion deep ultraviolet (DUV) lithography machines if they have any American components.
TechInsights analyst Dan Hutcheson states, “What they’re really doing is closing all the doors,” and the new regulations effectively prevent many potential future innovations. “They’re trying to future-proof the document.”
The manufacturers of the DUV machines are Nikon (7731.T) of Japan and ASML (ASML.AS) of the Netherlands, not any American toolmakers.
According to Clete Willems, a trade and policy attorney with Akin Gump, the DUV guidelines codified diplomatic efforts with the United States, Japan, and the Netherlands to impose comparable limitations on delivering the devices to China.
Analysts believe that immersion DUV machines, which can produce nearly as advanced semiconductors as cutting-edge ones, were recently employed by Huawei’s chip manufacturing partners to develop a new smartphone processor for the Mate 60 Pro.
Director of the Center for Strategic and International Studies, Gregory Allen, stated that “this control alone will limit China’s ability to expand advanced node semiconductor manufacturing for many years.”
“If spare parts and components for the equipment can be effectively controlled, the new regulations may degrade the advanced node manufacturing facilities that China currently has in operation.”
According to David Kanter, President of Real World Insights, authorities modified export prohibitions on Tuesday to target particular technologies and processes found in the sophisticated equipment required to construct improved transistor designs rather than the wide categories of instruments that were previously prohibited.
The regulations allow the toolmakers to sell equipment built to create much older chips without worrying that they would violate the government’s limits since they have narrowed the prohibited equipment.
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