Export Control or Control-Alt-Delete? Biden’s New AI Chip Restrictions Are Coming
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The Biden administration is reportedly finalizing fresh restrictions on the export of AI chips, specifically targeting companies like Nvidia and AMD.
These new rules are aimed at curbing the sale of high-performance AI chips used in data centers, further tightening the screws on an already strained U.S.-China tech relationship.
What’s in the Plan?
The new export restrictions will introduce a three-tiered system to determine which countries can access U.S.-made AI chips. Here’s how it could break down:
Top Tier: U.S. allies like Canada, the UK, and Japan will enjoy unmitigated access to AI chips.
Middle Tier: Some nations may face targeted restrictions, likely based on their geopolitical alignment.
Bottom Tier: The vast majority of the world—including, most notably, China—will be subjected to stringent country-level limits.
The Biden administration’s intent is clear: to prevent countries like China from gaining unfettered access to advanced AI technology that could be used for military or surveillance purposes.
However, the move also raises questions about collateral damage to U.S. chipmakers, especially Nvidia, whose A100 and H100 chips are already banned in China under earlier restrictions.
A Blow to Nvidia and AMD
Nvidia and AMD have been dominating the AI chip market, with Nvidia’s H100 chip being hailed as the “crown jewel” of Generative AI. But these companies are now walking a tightrope. Earlier export restrictions have already pushed Nvidia to develop lower-performance versions of its chips (like the A800 and H800) to comply with U.S. laws while still selling to China. The latest measures could make even this workaround unfeasible.
For Nvidia, China represents a significant slice of its revenue. In 2022 alone, Nvidia generated nearly $7 billion from Chinese customers, accounting for roughly 20% of its total sales. Losing access to this market could force the company to recalibrate its growth strategy entirely.
AMD, although not as heavily reliant on China, will also feel the heat. The company has been making strides in catching up with Nvidia in the AI chip race, and losing access to certain markets could hinder its competitive edge.
The new rules highlight how semiconductors have become the geopolitical currency of the 21st century. With AI chips forming the backbone of applications ranging from autonomous vehicles to natural language processing, the U.S. is leveraging its dominance in chipmaking to enforce its foreign policy goals.
China, predictably, has been vocal in its opposition. Beijing has accused the U.S. of engaging in “technological containment” and has ramped up its efforts to achieve semiconductor self-sufficiency. The Chinese government has poured billions into domestic chipmaking initiatives, although it remains years—if not decades—behind U.S. firms like Nvidia, AMD, and Intel.
But let’s not forget the irony here: China’s AI ambitions have inadvertently fueled the success of U.S. chipmakers. Over the past decade, Chinese firms have been some of the biggest buyers of American AI chips, driving innovation and profitability for companies like Nvidia.
By cutting off this revenue stream, the U.S. risks hurting its own industry.
While the restrictions aim to target adversaries, there’s a risk of unintended consequences for U.S. allies. For example, South Korea’s Samsung and SK Hynix, both major players in the memory chip market, rely heavily on U.S.-made semiconductor equipment. If these new export controls inadvertently disrupt supply chains, even American allies could find themselves in a bind.
And let’s not forget Europe. The EU has been pushing for greater semiconductor independence through its €43 billion European Chips Act. Could these restrictions unintentionally spur a wave of competition from other regions eager to reduce reliance on U.S. technology?
But China isn’t sitting idle. The country is doubling down on its domestic semiconductor industry, pouring investments into legacy chip manufacturing and working to circumvent U.S. restrictions. The Chinese government has also been accused of stockpiling AI chips ahead of expected bans, creating a potential gray market for high-performance semiconductors.
Moreover, Chinese tech giants like Huawei are developing alternatives. Earlier this year, Huawei unveiled the Kirin 9000S chip, reportedly manufactured domestically, which marked a significant step in China’s chipmaking journey. While these efforts fall short of matching Nvidia’s capabilities, they underscore Beijing’s determination to decouple from Western technology.
One can’t help but chuckle at the absurdity of the situation.
On one side, you have the U.S. attempting to choke China’s AI progress by banning chips that were—ironically—bought in bulk from American companies. On the other side, you have Chinese firms scrambling to create “AI lite” versions of banned technologies while stockpiling chips like they’re rare Pokémon cards.
And let’s not forget Nvidia, which has become the reluctant protagonist of this global drama, caught between two superpowers with very different agendas.
The new restrictions could be issued as early as Friday, signaling that the U.S. is not backing down in its efforts to maintain technological superiority. While the rules are likely to face pushback—from Beijing, U.S. businesses, and possibly even allies—they mark a significant escalation in the tech cold war.
For now, the semiconductor industry will continue to operate in a world where politics and technology are increasingly inseparable.
As the saying goes, "All’s fair in love and chip wars."
Whether these new measures will help the U.S. maintain its edge or create new challenges for its tech giants remains to be seen. One thing is certain: the AI chip race just got a whole lot more interesting.