According to CNBC, on October 17, local time, the US Department of Commerce announced plans to halt exports of more advanced Artificial Intelligence (AI) chips to China in the coming weeks. The US government stated that the new regulation aims to address loopholes that emerged after the implementation of AI chip export restrictions last year.
The initial US restrictions on AI chip exports to China prohibited the sale of the NVIDIA H100, a preferred processor for US AI companies like OpenAI. However, Chinese companies were still able to purchase slightly slower versions of the chip, the NVIDIA H800 or A800, primarily by reducing device connectivity speeds, which were in compliance with US initial limitations.
However, a senior US government official said at a press conference that the new regulations would also prohibit these chips.
The new rules may also affect chips sold by Intel and AMD. Additional regulations might hinder companies like Applied Materials, Lam, and KLA from selling and exporting semiconductor manufacturing equipment to China.
US chip restrictions towards China have severed a vast and continuously growing AI semiconductor market.
NVIDIA seemed to have anticipated these limitations and said as early as August that these restrictions would not immediately impact earnings materially, but could cause damage in the long run. "We comply with all applicable regulations while striving to support thousands of different industry applications. Given global demand for our products, we do not expect a significant impact on financial performance in the short term."
In a document submitted to the US Securities and Exchange Commission (SEC) on October 17, NVIDIA stated that these new restrictions apply to the company's A100, A800, H100, H800, L40, L40S, and RTX 4090 chips. The company also noted that the restrictions affected entire systems sold with these chips, including its DGX and HGX systems. NVIDIA mentioned that these limitations might hamper its ability to complete the development of new products as planned.
In a phone call with reporters, US Secretary of Commerce Gina Raimondo stated that the aim of US restrictions is to prevent China from obtaining advanced semiconductors that could drive AI breakthroughs. US officials said the measures are not intended to harm China's economic growth.
High-level US government officials noted that if data center chip performance exceeds thresholds set in October of last year, or surpasses new performance density benchmarks measured by flash count per square millimeter, the US will directly restrict the export of these chips.
Companies wishing to export AI chips to China or other embargoed regions must notify the US government.
High-level US officials also said they plan to expand the list of semiconductor manufacturing equipment subject to US restrictions.
Chips for consumer products like gaming consoles or smartphones will not be limited by US export controls, but if the speed of the chip is fast enough, businesses may have to report their orders to the Commerce Department.
The US government is also addressing loopholes in delivering chips to companies headquartered in embargoed regions like China to prevent companies from buying chips through foreign subsidiaries and shipping them to China.
Raimondo pointed out that the new restrictions would only affect a small portion of chip exports to China. "The fact is, even after this rule update, China will still import hundreds of billions of dollars in semiconductors from the US."
US officials said the regulations would be published for 30 days and then take effect.
As a result of this news, chip stocks fell sharply in trading on October 17. NVIDIA closed down about 5%, with Broadcom and Marvell falling approximately 2% and 1% respectively. AMD's stock price fell by more than 1%; Intel closed down about 1.4%.
On October 16, Mao Ning, a spokesperson for the Chinese Ministry of Foreign Affairs, held a regular press conference. A Reuters reporter asked, given that the Biden administration is expected to take more measures to restrict chip exports to China, how would China respond?
Mao Ning said that China has repeatedly stated its position on US export controls on chips to China. We believe the US should stop politicizing, weaponizing, and instrumentalizing trade and technology issues and cease destabilizing global production and supply chains. China will closely monitor relevant trends and resolutely defend its rights and interests.
