President Biden signed an executive order Wednesday to restrict or prohibit some new US investments in China in sensitive advanced technologies including semiconductors, quantum and some AI systems.
While the impact is far from clear, analysts said it appears it could have a greater impact on the world’s biggest GPU maker, Nvidia, than other US companies, although Nvidia and GPU competitors Intel and AMD did not comment immediately.
A 45-day comment period on the order is expected to generate interest by a wide range of tech investors and players, since the order is presumably forward-looking. However, the text of the order still has not been entered into the Federal Register, and the clock on the comment period has not even started.
Nvidia adjusted to a previous US export limit on its GPU sales to China by designing a special version of the A100 chip called the A800 that does not violate US export controls by offering somewhat slower data transfer rates.
In apparent anticipation of the Biden order, it was revealed this week that several Chinese internet giants including ByteDance, Tencent and Alibaba. recently rushed to buy $5 billion in Nvidia GPUs to power their AI projects, according to unnamed sources who spoke to the Financial Times. Their orders were for $1 billion to buy 100,000 A800s for delivery this year ($10,000 per chip) and a purchase of $4 billion worth of GPUs for delivery in 2024.
Biden’s order is “a narrowly targeted action to protect national security while maintaining our longstanding commitment to open investment,” according to a US Treasury Department fact sheet on the order as well as Treasury’s new Advanced Notice of Proposed Rulemaking to seek comments on the new program.
Some Democrats in Congress including Senate Majority Leader Chuck Schumer, D-NY, praised the action. “Today the United States is taking a strategic first step to ensure American investment does not go to fund Chinese military investment,” Schumer said in a statement.
GOP Senator Marco Rubio, D-Florida, however, criticized the proposal, saying it was filled with loopholes.
A spokesman for the Chinese Embassy in Washington said more than 70,000 US companies do business in China and the new restrictions will hurt both Chinese and American businesses and reduce investor confidence in the US, according to a Reuters report.
The Semiconductor Industry Association issued a statement expressing hope the order will allow US firms to “compete on a level playing field and access key global markets, including China, to promote the strength of the US semiconductor industry and our ability to out-innovate global competitors.”
China is a major market for Intel, but analyst Jack Gold said it isn’t clear how much the new Biden order will affect Intel. “Much of what Intel sells to China are PC chips which shouldn’t ben affected,” he said. “In the data center, they may not be able to sell their most premium, high performance CPU and GPU chips, but there are a lot of their mainstream chips that they already sell, which should be fine. I’m guessing this will be more a burden to Nvidia’s top of the line AI chips than to Intel at this point.”
While the order is forward-looking and investment focused, it does also require US persons to notify Treasury of certain transactions and prohibit US persons from undertaking certain other transactions of three advanced tech areas including semiconductors, AI and quantum.
China “is exploiting, or has the ability to exploit, US investments to further its ability to produce a narrow set of sensitive technologies critical to military modernization,” the Treasury fact sheet reads.
It adds: “The United States already prohibits or restricts the export to the PRC of many of the technologies and products under consideration for the new program. This new program would prevent US investments from helping accelerate the indigenization of these technologies in the PRC, which undermines the effectiveness of our existing export controls and inbound investment screening programs which also seek to protect U.S. national security.” Indigenization is the process of bringing something under the dominance or influence of people native to an area.