The Biden administration has drawn criticism because of perceived shortcomings in the original export controls. The US unveiled the original restrictions before getting the support of key allies, notably the Netherlands and Japan, which allowed chip equipment companies in those countries to continue selling advanced gear to Chinese customers.
That helped facilitate China’s progress in developing its domestic tech capabilities. Huawei Technologies, a Chinese telecommunications giant at the heart of US-China tensions, quietly introduced a new smartphone in August powered by an advanced, 7-nanometre processor. A teardown of the phone revealed the chip was produced by a Chinese company, demonstrating manufacturing capabilities well beyond where the US had sought to stop its advance.
‘While the Huawei phone is not itself a major national security issue for the United States, what the chip inside signals about the state of the Chinese semiconductor industry absolutely is.’
Gregory Allen, Center for Strategic and International Studies
The achievement cast doubt on Washington’s ability to thwart Beijing’s technological ambitions, and spurred political pressure for the Biden administration to impose more sanctions on Huawei and its chipmaking partner, Semiconductor Manufacturing International Corp. The US has begun a formal investigation into the Huawei phone. Any resulting restrictions on Huawei or SMIC would be a separate process from the new export control rules.
“While the Huawei phone is not itself a major national security issue for the United States, what the chip inside signals about the state of the Chinese semiconductor industry absolutely is,” Gregory Allen, director of the Wadhwani Center for AI and Advanced Technologies at the Center for Strategic and International Studies, wrote in a report this month. “These advanced chip production capabilities will inevitably be made available to the Chinese military if they have not been already. Thus, the Huawei and SMIC breakthrough raises many tough questions about the efficacy of the current US approach.”
Several companies have objected to the Biden administration’s strategy. Peter Wennink, chief executive officer of Dutch chip equipment leader ASML Holding, publicly opposed the measures and warned that Chinese companies would develop competing technology. US companies such as Nvidia – the leader in graphics chips used to develop artificial intelligence services – have also questioned the long-term effectiveness of limiting trade.
Nevertheless, the Biden administration is seeking to address several outstanding issues with the tighter rules, particularly the development of AI and the shipment of technologies through other countries.
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The new controls on graphics chips cover components called accelerators, which are used in data centres to train AI software. The Biden administration is tweaking the parameters which govern the export of those chips to China – a move that comes after Nvidia developed a China-specific model to work around last year’s curbs.
In addition, the rules will restrict shipments of certain chips to Chinese companies’ overseas subsidiaries and affiliates, and begin requiring a license to export prohibited technologies to countries that could be used as intermediaries.
At the same time, Washington acquiesced to companies’ calls for fewer blanket restrictions, as industry leaders say they need to sell into the world’s largest chip market. Under the new rules, firms will be allowed to export to China all but the most powerful consumer graphics chips, which are typically used in gamer PCs, and will have to notify the US government before shipping a select few consumer chips at the cutting edge.
Nvidia and rival Advanced Micro Devices rely on their massive consumer chip sales to fund their research and development of data centre technology.
The updated rules will not include restrictions on Chinese companies’ access to US or allied cloud computing services, according to US officials familiar with the rules. The administration will issue a request for comment to better understand possible national security risks associated with this access and options to potentially address them.
The US also extended waivers for South Korea firms Samsung Electronics and SK Hynix, plus Taiwanese chip giant Taiwan Semiconductor Manufacturing, to continue shipping some restricted chipmaking technology to their facilities in China.
Bloomberg
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