Updated with Nvidia reaction*
Nvidia sales of advanced chips to Chinese companies may be the hardest hit under a new round of Biden administration actions designed to stop Beijing from access to cutting-edge tech that could strengthen the Chinese military.
The newest rules, advanced by the administration on Tuesday, close loopholes in regulations released last October. They are designed to limit China’s access to advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to Chinese military applications, said Commerce Department Secretary Gina Raimondo.
"Today's updated rules will increase effectiveness of our controls and further shut off pathways to evade our restrictions," she said in a statement posted by the Bureau of Industry and Security under Commerce. "These controls maintain our clear focus on military applications and confront the threats to our national security posed by the PRC Government's military-civil fusion strategy."
One target of the newest rules is chips like Nvidia’s A800 and H800 chips that Nvidia created to skirt some of the requirements imposed a year ago by the Biden administration. Previously, the Biden administration sought to exclude chips from sale to China based on performance and interconnect bandwidth, seen as important in artificial intelligence systems.
The Semiconductor Industry Association issued a brief statement urging the administration to strengthen coordination with US allies to “ensure a level playing field for all companies.” The SIA has been concerned in the past with US-led trade restrictions that might limit sales into China by US chipmakers.
SIA also said it recognizes the need to protect national security, adding that “maintaining a health US semiconductor industry is an essential component” to protecting national security. The trade group warned that “overly broad, unilateral controls risk harming the US semiconductor ecosystem without advancing national security as they encourage overseas customers to look elsewhere.”
Both Nvidia and to a lesser extent Intel, created chips for the Chinese market that retained performance density but limited interconnect bandwidth to stay inside last year’s rules. But Tuesday’s new rules eliminate the interconnect bandwidth requirement and focus instead with a new "'performance density threshold,' which is designed to preempt future workarounds." One Biden administration official told Reuters that the change will have the effect of halting sales of Nvidia’s A800 and H800 into the China market.
This official added that the rule would prevent companies from working around Biden administration restrictions on full chips by using chiplet technology, meaning chips made up of other smaller chips. Chiplets are an increasingly used technology that has grown especially more lately in China, apparently to evade US restrictions.
The new measures do several other things that could impact sales of chips by US companies, including an expansion of licensing for exports of advanced chips to more than 40 countries that present risks of diversion of those chips to China. Nvidia was told in August it should restrict sales of A100 and H100 chips beyond China to other regions, including the Middle East. Chips will be barred from being sent to units of firms located anywhere in the world if their parent companies are headquartered in China, Macau and some arms embargoed countries.
The new rules also hit 21 countries outside China and Macau with a licensing requirement on those making chipmaking tools. Controls on more types of chip making equipment are also added.
Bueau of Industry and Security has also posted a document with brief summaries and links to its latest actions.
Other industry reaction
SEMI, representing the global electronics design and manufacturing supply chain, issued this statement: We recognize and appreciate that sustaining a robust U.S. semiconductor sector is central to the Administration's national security objectives. However, given the risks of unilateral and broad controls, we will continue to evaluate the consequences of these export controls and communicate to the Administration the impacts to the global and U.S. semiconductor supply chain.”
The ITIF think tank was more strident: "Limiting sales of semiconductors to China risks significantly reducing allied semiconductor competitiveness...By cutting off US sales, US firms will lose the most profitable part of their market [to China], significantly reducing profits that otherwise would be invested in research and development for the next generation of chips. The issue here is not whether the United States works to restrict Chinese innovation advancement, it's how to do that in a way that is effective without hurting US capabilities."
ITIF is the Information Technology Innovation Foundation, based in Washington.
The new rules took a toll on Nvidia's stock price, sending it down 3% by market close. Intel was down more than 1% and AMD, which also makes advanced chips, was also down by more than 1%.
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