How US is Trying to Stop China from Getting AI Chips

(iexclusivenews) – Artificial intelligence (AI) is a powerful technology that can enable machines to perform tasks that normally require human intelligence, such as recognizing faces, understanding speech, and playing games.

AI relies on specialized hardware, such as semiconductor chips, to process large amounts of data and run complex algorithms.

The United States is the global leader in producing and exporting AI chips, but it faces a growing challenge from China, which is eager to develop its own AI capabilities and reduce its dependence on foreign suppliers.

To prevent China from gaining access to its advanced AI chip technology, the US government has been imposing export controls and restrictions on its chip makers and cloud service providers.

However, China has been finding ways to circumvent these measures and obtain AI chips from third parties.

In this article, we will explore how the US is trying to tighten its AI chip controls to China, and how China is responding to these actions.

US Targets Third-Party Loophole for AI Chip Exports

According to a report from Reuters on Oct. 13, the Biden administration is considering additional measures to curb Chinese developers from purchasing AI chips made in the US via third parties.

The report cites people close to the matter who said that the US is targeting a loophole that has allowed Chinese developers to buy chips from the infamous Huaqiangbei electronics area in Shenzhen, a city in southern China.

Huaqiangbei is known as a hub for electronic components and devices, where vendors sell everything from smartphones and laptops to drones and robots.

Some of these products contain AI chips that are manufactured in the US or use US technology.

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

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US Imposes Export Controls on Top Chip Makers

The US government has been imposing export controls on its top chip makers since October 2022, when it added 28 Chinese entities, including some of the country’s leading AI companies, to its Entity List.

This list restricts the export, re-export, or transfer of certain items subject to the Export Administration Regulations (EAR) to these entities without a license.

In July 2023, the US 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, US regulators have since denied explicitly blocking AI chip exports to the Middle East.

These export controls have had a significant impact on the revenue and growth prospects of the US chip makers, especially Nvidia, which relies heavily on the Chinese market for its sales.

In its latest quarterly report, Nvidia warned regulators that its long-term results could be “harmed” if the company is “effectively excluded from all or part of China.”

The majority of Nvidia’s revenue comes from the US, China and Taiwan, while less than 14% comes from all other countries combined.

US Considers Restrictions on Cloud Computing Services

The US government is also trying to limit China’s access to cloud computing services that use AI chips made in the US or with US technology.

Cloud computing services, such as Amazon Web Services (AWS), allow users to access computing resources over the internet without having to own or maintain them.

These services can enable users to run AI applications and access large datasets without having to invest in expensive hardware.

According to Reuters, US officials began their considerations on restrictions on access to cloud computing services by Chinese companies in July 2023, in an effort to safeguard the country’s advanced technology.

The report cites people familiar with the matter who said that the US is looking into ways to prevent Chinese users from accessing cloud services that use AI chips subject to export controls.

However, the sources also said that finding solutions for this issue seems “less clear,” as cloud services are more difficult to track and regulate than physical products.

Moreover, imposing restrictions on cloud services could affect not only Chinese users but also other customers who rely on these services for their businesses.

China Responds with Countermeasures

China has not been idle in response to the US’s actions. The country has been investing heavily in developing its own domestic chip industry and reducing its reliance on foreign suppliers.

According to a report by IC Insights, China’s spending on semiconductor equipment reached $19.4 billion in 2022, surpassing North America’s $17.9 billion and becoming the world’s largest market for chip-making equipment.

China has also been controlling exports of some of the key materials for making AI chips, such as gallium and germanium.

These materials are used for producing compound semiconductors, which have superior performance and efficiency than traditional silicon-based semiconductors.

In July 2023, China announced that it would require exporters of gallium and germanium to obtain licenses from the Ministry of Commerce.

China’s actions have raised concerns among some of the US’s allies, such as Japan and South Korea, which are also major producers and consumers of semiconductor chips.

These countries fear that China’s export controls could disrupt the global supply chain and affect their own industries.

What You ou Should Know

The US and China are engaged in a fierce competition over AI chip technology, which is seen as a key factor for the future of innovation and economic growth. The US is trying to stop China from getting access to its advanced AI chip technology by imposing export controls and restrictions on its chip makers and cloud service providers. However, China is finding ways to circumvent these measures and obtain AI chips from third parties. China is also developing its own domestic chip industry and controlling exports of some of the key materials for making AI chips.

The outcome of this competition will have significant implications for the global balance of power and the development of AI applications in various fields. As both countries continue to pursue their interests and goals, they will also have to deal with the challenges and risks that come with AI technology, such as ethical, legal, and security issues.