Biden considers tightening AI chip controls to China via third parties

The United States government is considering additional measures to curb Chinese developers from gaining access to artificial intelligence (AI) semiconductor chips made in the U.S. via third parties.

According to a report from Reuters on Oct. 13, people close to the matter have said that the Biden administration is targeting a loophole that has allowed developers in China to purchase chips from the infamous Huaqiangbei electronics area in Shenzhen, a city in southern China.

The sources reportedly claim that the additional rules on AI chips will come out this month and will apply restrictions previously applied only to the U.S.’s top players like Nvidia and AMD but more broadly to all companies producing similar materials in the market.

Over the summer, the U.S. government applied additional rules to its largest chip makers, including Nvidia, which currently leads the market in chip manufacturing. It asked the companies to curb exports of their high-level semiconductor chips to “some” Middle Eastern countries, among other small details.

However, U.S. regulators have since denied explicitly blocking AI chip exports to the Middle East.

In response, Nvidia warned regulators that long-term results in revenue could be “harmed” if the company is “effectively excluded from all or part of China.” The majority of Nvidia’s revenue comes from the U.S., China and Taiwan, while less than 14% comes from all other countries combined.

Reuter’s sources have said that the Biden administration is also trying to troubleshoot a loophole that allows Chinese parties access to U.S. cloud service providers like Amazon Web Services (AWS). According to the report, those solutions seem “less clear.”

In July, U.S. officials reportedly began their considerations on restrictions on access to cloud computing services such as AWS by Chinese companies in an effort to safeguard the country’s advanced technology.

The U.S. implemented its initial export controls on its most powerful semiconductor chip technology back in October 2022.

Washington has since tightened measures and is still considering taking additional action to even further limit the computing power of chips available in the Chinese market.

China has also acted in response to the ever-tightening measures from the United States. In July, it said it would be controlling exports of gallium and germanium, two primary materials for the production of AI chips.