Highlights

• Biden administration introduces new rules affecting chip exports to China, impacting Nvidia, Intel, and AMD.
• U.S. Bureau of Industry and Security open to industry input on supplying AI chips to China for smaller systems.
• Rules designed to limit China’s ability to utilize U.S. chips in building supercomputers, particularly for military purposes.
• Emphasis on capabilities that could enhance Chinese military systems, rather than broad consumer applications.
• Officials seek “tamperproof” method to prevent aggregation of up to 256 AI chips into a supercomputer.
• Nvidia, Intel, and AMD refrain from commenting on the new rules; Nvidia’s shares experience a 4.67% decline.
• New rules hamper capable Chinese competitors of Nvidia, Intel, and AMD, potentially solidifying their position in the Chinese market.
• Restrictions on export of advanced chipmaking equipment, affecting China’s chip manufacturers.
• U.S. officials target specific technologies and techniques in chipmaking equipment, allowing sales for older chip designs.
• Impact of regulations crucial in shaping future of chip manufacturing, influencing competitiveness and technological advancements.

In a strategic move to safeguard American technological interests, the Biden administration has issued a set of comprehensive rules with potential implications for chipmakers Nvidia, Intel, and Advanced Micro Devices (AMD). While these regulations aim to restrict China’s access to critical U.S. artificial intelligence chips, they also offer a potential lifeline to the aforementioned companies, enabling them to maintain their foothold in one of the world’s largest chip markets.

Deep within the 400-plus pages of regulations unveiled on Tuesday, the U.S. Bureau of Industry and Security (BIS) expressed willingness to consider suggestions 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 is to curtail China’s ability to leverage American chips in constructing vast supercomputers, which could potentially be employed for military applications. Thomas Krueger, a former U.S. National Security Council export control official, emphasized that the focus is on capabilities that could enhance Chinese military systems, rather than broad consumer applications.

Officials have sought input for devising a “tamperproof” method to prevent the aggregation of up to 256 AI chips into a supercomputer. This approach aims to restrict controlled AI chips from being employed in training large dual-use AI models with potentially concerning capabilities, while still permitting AI training at a smaller scale.

In response to these developments, Nvidia, Intel, and AMD chose not to comment. Nvidia’s shares experienced a 4.67% decline following the announcement of the new rules.

Another significant outcome for Nvidia, Intel, and AMD is the limitation imposed on their most capable Chinese competitors. The new rules will make it exceedingly difficult for well-funded Chinese startups Moore Threads and Biren, founded by Nvidia alumni, to have their designs manufactured using cutting-edge chipmaking technology. This implies that whatever Nvidia can offer to China is likely to be the top legal option for Chinese buyers.

As part of the new regulations, U.S. officials have targeted China’s chip manufacturers by restricting the export of advanced chipmaking equipment known as immersion deep ultraviolet (DUV) lithography machines if they contain any American parts. This move, according to TechInsights analyst Dan Hutcheson, effectively closes off a substantial portion of potential future developments.

While these rules may have complex implications, they signify a significant step in shaping the future of chip manufacturing and export, with Nvidia, Intel, and AMD at the forefront of these strategic considerations. As the semiconductor industry continues to evolve, the impact of these regulations will undoubtedly play a crucial role in determining the competitive landscape and technological advancements in the global chip market.