Semiconductor makers Nvidia and AMD could be hit by update of controls that were introduced in October
By Demetry Sevastopulo
June 28, 2023
Nvidia has been throttling the capabilities of its artificial intelligence processors to comply with export controls © I-Hwa Cheng/Bloomberg
The Biden administration is contemplating new export controls on chips for artificial intelligence, as Washington increases its efforts to make it harder for China to obtain technology with military applications.
The update by the US commerce department to sweeping export controls introduced in October could make it harder for companies such as Nvidia and Advanced Micro Devices to sell advanced chips to China, according to three people familiar with the situation.
The move would have a significant effect on Nvidia, which responded to the October 7 controls by designing graphics processing unit chips called the A800 and H800 to replace more advanced chips that were restricted under the new rules.
Nvidia’s chief executive Jensen Huang recently told the Financial Times that the existing export controls could cause “enormous damage” to the US tech industry. He said they had left his company with its “hands tied behind our back” by preventing the Silicon Valley group from selling its most advanced chips to China.
While the A800 and H800 are slower than the chips they replaced, they are still the most important technology powering AI research and development for China’s tech giants.
Tencent, Alibaba, Baidu, ByteDance and other Chinese groups placed additional orders for Nvidia chips when the generative AI wave exploded in China this year, according to two people familiar with the situation.
Nvidia chief financial officer Colette Kress said on Wednesday the group would not suffer “immediate material” impact if Washington tightened the export controls to target A800 and H800 chips.
But such a move would have an effect on the company over time, she added. Kress said restrictions on selling data centre GPUs to China would in the long term “result in a permanent loss of opportunities for the US industry to compete and lead in one of the world’s largest markets and the impact on our future business and financial results there”.
She said China historically accounted for 20-25 per cent of Nvidia’s revenue from data centre-related products.
The new export controls would mark the latest effort by President Joe Biden to make it harder for China to obtain advanced technologies, including AI chips that can be used for everything from the research and development of hypersonic weapons to nuclear weapons modelling.
The FT reported in March that Chinese companies, including AI surveillance groups that are blacklisted by the US, were finding ways to circumvent the export controls, including by renting access to A100 chips.
National security adviser Jake Sullivan has described the Biden administration’s approach as creating a “high fence” around a “small yard” of critical technologies such as AI, which are capable of enabling the Chinese military to use American technology to harm US security interests.
Paul Triolo, a China and technology expert at the Albright Stonebridge consultancy, said updating the October 7 rules meant the “small yard, high fence” description was “less credible” because the impact would be “broad and increase substantially over time”. Beijing accuses the US of trying to “contain” China.
In a move in May that most experts saw as retaliatory, China banned the country’s infrastructure operators from buying chips from Micron, the Idaho-based semiconductor maker.
Biden is also preparing to issue an executive order that would create a mechanism to screen investment bound for China, in an effort to reduce the odds that US investors help support the Chinese military.
In recent months, the US and EU have stressed that they are engaging in “de-risking” in targeted sectors and not pushing for broader decoupling. Chinese premier Li Qiang this week criticised that policy, saying any attempt to de-risk from China was a “false proposition”.
The update of export controls is expected to occur at some point over the summer. It will come as the US and China continue to attempt to stabilise their relationship, which has deteriorated to its worst state since the countries established diplomatic ties in 1979.
US secretary of state Antony Blinken visited China last week for meetings with President Xi Jinping, Chinese foreign minister Qin Gang and Wang Yi, China’s top diplomat.
Xi and Blinken described the visit as “constructive”. However, the nascent efforts to put a “floor” under the relationship suffered an immediate setback when Biden last week described Xi as a “dictator” in off-the-cuff remarks at a presidential campaign fundraising event.
The US commerce department and Nvidia declined to comment on the expected update to the export controls, which was first reported by The Wall Street Journal.