US Commerce Secretary Gina Raimondo criticized Nvidia for skirting trade rules with its AI chips during a weekend appearance at the Reagan National Defense Forum in Simi Valley, California.
Nvidia had designed chips specifically for the Chinese market after the US imposed an initial round of curbs in October 2022, then did it again recently after the curbs were updated in October.
“If you redesign a chip around a particular cut line that enables them to do AI, I’m going to control it the very next day,“ Raimondo said. Her entire appearance is available online on Youtube, starting about 15 minutes into the video.
"We have to get to a place with industry where we say our national security goal is to have no AI special sauce in your chip, for example, and just don't do it," she said.
The discussion with industry needs to be "nuanced" and "continuous." Otherwise, she said, "We just draw the line, and they engineer around the line... We have to have a more continuous discussion with industry where we make our intentions clear...and then industry needs to comply."
In October, the Commerce Department updated the 2022 semiconductor curbs to control Nvidia’s made-for-China chips, but Nvidia immediately followed up with a designs for three new AI products for sales into China.
RELATED: Nvidia skirts latest US export rules with new GPUs for sale to China
Raimondo was clear in calling on private companies to adapt to US security priorities such as the export controls.
“I know there are CEOs of chip companies in this audience who were a little cranky with me when I did that because you’re losing revenue,” she said. “Such is life. Protecting our national security matters more than short-term revenue.”
She added: “On matters of national security, we’ve got to be eyes wide open about that threat. This is the biggest threat we’ve ever had and we need to meet the moment. We cannot let China get these chips. Period. We’re going to deny them our most cutting-edge technology."
She also called on Congress for more funding for the Commerce Department’s Bureau of Industry and Security.
“I have a $200 million budget. That’s like the cost of a few fighter jets. If we’re serious, let’s go fund this operation like it needs to be funded." She said the BIS has 100 workers devoted to issues related to semiconductors, part of a more "muscular" approach than in prior administrations. However, the demands for more permits and other tasks are growing faster than in the past.
Raimondo said she realizes that every trade restriction imposed by BIS has an impact on the US semiconductor industry. "Is industry on board [with trade restrictions]? Yes, but... They are in the business of making money but every time i take an action it denies them revenue. My own view is that... democracy is good for your businesses. Rule of law, here and around the world, is good for your businesses. It might make for a tough quarterly shareholder call, but in the long run it's worth you working with us to defend our country's national security. If you're not selling into China a decade from now, it's not because of our export controls, it's because China is designing you out...We have to be eyes wide open about the threat from China and work together. "
Nvidia has said in the past when trade restrictions were imposed that it continues to follow applicable regulations regarding exports and other areas.On Monday, a spokesperson at Nvidia repeated: "We are engaged with the US government and, following the government's clear guidance, are working to offer compliant data center solutions to customers worldwide."
The latest new AI chips for sales into China being made by Nvidia are the H20, L20 and L2 GPUs, due to go into mass production soon. Sales of the Nvidia H100 and A100 chips into China were banned by the Us a year ago, but Nvidia produced alternatives called the H800 and A800 that could still legally be sold into China. Then, on Oct. 17, the Bureau of Industry and Security announced it was also restricting export of Nvidia H800 and A800, among others, that it said could be used by China to fuel breakthroughs in AI and computers deemed critical to Chinese military operations.
Nvidia and Intel have been concerned about the potential of losing sales to China, a large consumer of semiconductors in general, not only GPUs and AI chips of other types. Nvidia controls about 90% of the GPU market. Intel and AMD also make GPUs, while Intel markets CPUs and other products to run AI training and inference.
Raimondo also told the audience that NIST will begin dispersing $39 billion in CHIPS Act funds before the end of the year, but added it is not going to be enough to satisfy all the applicants. "I'll be dishing out disappointment," she said. "I'm going to do everything I can to stretch this capital."
She noted, as she has before, that all of Nvidia's chips are made in Taiwan, even though they are designed in the US and elsewhere, putting them along with other advanced chips at a security risk. "We can't move fast enough" to manufacture chips in the US, she said.