Exclusive: Biden eyes adding AI chip curbs to Chinese companies abroad

The Biden administration is actively considering the closure of a significant loophole that currently grants Chinese companies access to American artificial intelligence (AI) chips through overseas units. This strategic move comes in response to heightened tensions between the United States and Beijing, marked by last year’s introduction of stringent restrictions on the export of AI chips and chipmaking tools to China, aimed at curbing its military advancements. As these rules are poised for further tightening, insiders suggest that measures to address this specific loophole may be integrated into the upcoming regulatory changes.

In the initial wave of restrictions, the Biden administration inadvertently left overseas subsidiaries of Chinese companies with unrestricted access to the same semiconductors, posing a risk of easy smuggling into China or remote access by China-based users. Reports from June highlighted that the very chips restricted by U.S. regulations could be readily obtained from vendors in Shenzhen’s renowned Huaqiangbei electronics area.

Recognizing the urgency, Washington is actively exploring strategies to close this loophole, underscoring the complexities the administration faces in its ongoing efforts to restrict China’s access to critical AI technology. Greg Allen, a director at the Center for Strategic and International Studies, emphasized the global scope of the issue, noting that Chinese firms are actively purchasing chips for use in data centers abroad, with Singapore emerging as a significant hub for cloud computing.

While the Commerce Department remains tight-lipped on the matter, the Chinese Embassy has previously accused the U.S. of abusing export controls, urging an end to what they term as “unreasonable suppression of Chinese companies.” Experts note the legal challenges in policing transactions, highlighting the potential for China-based employees to remotely access chips located at foreign subsidiaries.

The United States, driven by national security concerns, aims to curb China’s rise in artificial intelligence capabilities, particularly in military applications. A report from The International Affairs Review revealed that China’s AI capabilities heavily depend on access to U.S. chips, a fact corroborated by a June 2022 report from the Center for Security and Emerging Technology (CSET). CSET found that a significant number of AI chips procured by the Chinese military were designed by U.S.-based companies such as Nvidia, Xilinx, Intel, and Microsemi.

In previous attempts to plug loopholes, Washington directed Nvidia and AMD in August to restrict shipments of AI chips beyond China, extending these limitations to other regions, including some Middle Eastern countries. Anticipated new rules on AI chips are expected to broaden these restrictions across the entire market.

The challenge persists as the U.S. government grapples with closing loopholes that grant Chinese entities access to U.S. cloud providers like Amazon Web Services. Despite legal restrictions on shipping AI chips to mainland China, the ease with which Chinese parties can access these chips globally remains a concern. Timothy Fist, a fellow at the Center for a New American Security, highlighted the absence of rules governing access, emphasizing the need for comprehensive measures to address this evolving issue. D9art Creative House closely monitors these developments, recognizing the dynamic landscape of AI and its implications for global security and technological advancements.