Biden Administration Weighs Further Curbs on Sales of A.I. Chips to China

The Biden administration is considering further restricting access to key Chinese technologies, including restricting sales of high-end chips that power artificial intelligence, according to five people familiar with the deliberations.

The regulation will cripple sales to China of advanced chips made by companies such as Nvidia and Advanced Micro Devices, which are needed to power data centers that power artificial intelligence.

Biden officials said China’s artificial intelligence capabilities could pose a national security threat to the United States by strengthening China’s military and security apparatus. Concerns include the use of AI in guiding weapons, conducting cyberwarfare, and enhancing facial recognition systems used to track dissidents and minorities.

But such restrictions would hurt semiconductor makers, including those in the United States, which still make most of their revenue in China.

The deliberations were first reported by The Wall Street Journal. Nvidia shares fell about 2% in Wednesday morning trading after reports of a possible export crackdown. The company has been one of the main beneficiaries of the artificial intelligence craze, with its stock soaring nearly 180 percent this year.

Nvidia’s chief financial officer, Colette Kress, said in a call with reporters on Wednesday that the adoption of such additional restrictions would not have an immediate impact on NVIDIA’s financial performance. But in the long run, she said, they “permanently lose the opportunity for American industry to compete and lead in one of the world’s largest markets.” He added that China typically generates 20% to 25% of the company’s data center revenue, which includes other products in addition to AI-enabling chips.

Shares of semiconductor companies Qualcomm, Intel and Applied Materials all fell more than 2% Wednesday morning.

Intel declined to comment, as did the Department of Commerce, which oversees export controls. AMD did not respond to a request for comment.

Curbing sales of high-end chips is the latest step in the Biden administration’s campaign to drain China of the advanced technology needed for everything from self-driving cars to robotics.

Last October, the government invoked broad restrictions on the types of advanced semiconductor and chip-making machinery sent to China. This rule applied industry-wide, but had a particularly big impact on his Nvidia. The industry leader says it won’t sell to China its top-of-the-line A100 and H100 chips, which are adept at performing many of the processes required to build artificial intelligence, unless it first obtains a special license. was forbidden.

In response to these restrictions, Nvidia has Now offering downgraded A800 and H800 chips in China last year.

Additional restrictions under consideration as part of the process of finalizing these previous rules would also ban the sale of NVIDIA’s A800 and H800 chips, and similarly advanced chips from competitors such as AMD and Intel. increase. The Department of Commerce will continue to ship to the country.

The deliberations have sparked a fierce lobbying campaign, with Intel and Nvidia working to prevent further curbs on their businesses.

Semiconductor companies argue that being cut off from major markets like China will greatly reduce their revenues and reduce their ability to spend on research and innovation for new chips. In an interview with the Financial Times last month, NVIDIA’s CEO said: Jensen Huang warned He said U.S. high-tech industries would be at risk of “tremendous damage” if they were cut off from trade with China.

The Biden administration is also internally debating where to draw the line on chip sales to China. Their goal is to limit the technological capabilities that could help the Chinese military direct weapons, conduct cyberwarfare, and power surveillance systems, while such rules impose restrictions on private companies. It’s about minimizing the impact.

The move, which comes at a time when the United States is also considering expanding investment restrictions on Chinese tech companies, is likely to confuse the Chinese government. Biden officials have been working in recent weeks to improve bilateral relations after a Chinese surveillance balloon flew over the United States and clashed with China earlier this year.

Secretary of State Antony J. Brinken is visiting Beijing this month to meet with Cabinet members, and Treasury Secretary Janet Yellen is due to visit China soon.

Speaking at the Council on Foreign Relations in New York on Wednesday, Brinken said China’s concerns that the United States was trying to slow its economic growth were “part of a long conversation we just had in Beijing.” rice field.

Chinese officials believe the United States is “trying to block China globally and economically,” he said. However, he disputed the idea.

“What would be in our interest to have access to technology that they could turn to use against us?” The question cites the development of missiles and the “possibility of suppression” of artificial intelligence.

“If they were in our shoes, they would do exactly the same thing,” he said, adding that the U.S. imposed “very targeted, very narrow regulation.”

Nvidia’s valuation had skyrocketed in light of the recent boom in generative artificial intelligence services that can generate complex written answers to questions and images based on a single prompt. Microsoft worked with OpenAI, which created the chatbot ChatGPT, to generate results on the Bing search engine, and Google developed a competing chatbot called Bard.

As companies race to incorporate this technology into their products, demand is growing for chips like Nvidia’s that can handle complex computing tasks. The momentum has pushed Nvidia’s market capitalization past his $1 trillion mark, making the company the sixth largest in the world by value.

Nvidia As stated in the August filing If “customers do not want to buy the company’s alternative products” or if the government does not authorize the sale of the A100, $400 million in revenue from “potential sales to China” will go to the United States, including the sale of the A100. may be subject to export controls. The company plans to continue selling chips in China.

Since the restrictions were imposed, Chinese chip makers have overhauled their supply chains and sought to develop domestic sources of advanced chips, but China’s ability to produce cutting-edge chips still lags behind the United States in years. is too late.

Joe Rennison and Don Clark Contributed to the report.

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