US intensifies technology competition by cutting China off from AI chips

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The Biden administration is reducing the types of semiconductors that U.S. companies can sell to China, as it wants to close loopholes in existing regulations announced last year.

The U.S. Department of Commerce announced new rules Tuesday that further tighten a broad set of export controls first introduced in October 2022.

U.S. Commerce Secretary Gina Raimondo said in a statement that the updated rules will “increase the effectiveness of our regulations and further disrupt routes to avoid them.” “We continue to work to protect our national security by restricting access to critical technology and carefully enforcing the rules, while minimizing unintended impacts on trade flows,” she said. ”

Advanced artificial intelligence chips such as Nvidia’s H800 and A800 products are affected, according to a regulatory filing from the U.S. company.

The ban also extends export controls beyond mainland China and Macau to 21 other countries on which the United States maintains arms embargoes, including Iran and Russia.

The measure affects the stock prices of major U.S. semiconductor manufacturers and is expected to take effect within 30 days.

The original rules were aimed at hampering China’s ability to procure advanced computing chips and manufacture advanced weapons systems. Since then, government officials have suggested that advances in technology require adjustments.

Raimondo, who visited China in August, said the administration is “focused” on slowing the progress of the Chinese military. He emphasized that the U.S. government has chosen not to go further in restricting chips for other uses.

Chips used in phones, video games and electric cars were intentionally excluded from the new rules, government officials said.

But such assurances are unlikely to reassure Beijing, which has vowed to “win the battle” with core technologies to strengthen the country’s position as a technology powerhouse.

China’s Foreign Ministry on Monday criticized the Biden administration’s new rules before they were officially announced.

“The United States needs to stop politicizing and weaponizing trade and technology issues, and stop destabilizing global industrial and supply chains,” Mao Ning said at a press conference. “We will closely monitor developments and firmly protect our rights and interests.”

The Chinese government was informed of the impending update as part of an ongoing dialogue that Raimondo and other U.S. officials have established with Chinese officials, a senior administration official said.

“We clearly communicated to the Chinese side that these rules apply, but there were no negotiations with the Chinese side,” the official told reporters.

Technology competition between the world’s two largest economies is intensifying. In recent months, the United States has called on allies in Europe and Asia to restrict sales of advanced chip-making equipment to China.

In July, the Chinese government counterattacked by imposing its own restrictions on exports of germanium and gallium, two elements essential to semiconductor manufacturing.

Shares of U.S. semiconductor manufacturers fell on Tuesday following the announcement of new export restrictions.

Nvidia (NVDA) stock closed down 4.7%, while Intel (INTC) fell 1.4%. US AMD (AMD) stock ended down 1.2%.

Nvidia said in a filing that the rule imposes new licensing requirements for exports to other markets such as China, Saudi Arabia, the United Arab Emirates and Vietnam.

The company said its A800 chips, which were allegedly manufactured for customers in China to circumvent last year’s regulations, are among the affected parts.

Nvidia says US curbs on AI chip sales to China will cause ‘permanent opportunity loss’

However, “given the strength of global demand for our products, we do not expect the additional restrictions to have a material impact on our financial results in the near term,” NVIDIA said.

The entire U.S. semiconductor manufacturing industry is also studying the impact of the new rules.

The Semiconductor Industry Association said in a statement on Tuesday that while it recognizes the need to protect national security, “overly broad and unilateral regulations would encourage overseas customers to look elsewhere and “It risks harming the U.S. semiconductor ecosystem without promoting national security.”

The group, which represents 99% of the U.S. chip sector, added, “We call on the administration to strengthen collaboration with our allies to ensure a level playing field for all companies.”

This measure is also being considered in Europe. Dutch semiconductor equipment maker ASML said on Tuesday it was assessing the impact of the rule but did not expect it to have a “material impact on our financial outlook for 2023.”

ASML CEO Peter Wennink said in a conference call Wednesday to discuss the company’s third-quarter results that the updated export restrictions will affect 10-15% of the company’s sales to China. said.

The U.S. Commerce Department on Tuesday added 13 Chinese companies to a list of companies with which U.S. companies are prohibited from doing business for national security reasons.

These include two Chinese startups, Biren Technology and Moore Thread Intelligent Technology, and their subsidiaries.

The department claims these companies are “involved in the development of advanced computing chips that have been found to be involved in activities contrary to the national security of the United States.”

CNN has reached out to Billen and Moore-Thread for comment.

— Anna Cooban contributed reporting.

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