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The Biden administration is tightening export controls on cutting-edge artificial intelligence chips, updating existing rules that will significantly limit the ability of Nvidia and other manufacturers to sell high-performance semiconductors to China.

The U.S. Commerce Department on Tuesday expanded sweeping export controls first imposed in October 2022 to reflect technological advances and also make it harder for companies to find ways to get around the restrictions.

Commerce Secretary Gina Raimondo said the aim of the update was to restrict China’s access to advanced chips that could “drive breakthroughs in artificial intelligence and advanced computing” that are critical to China’s military.

A potential summit between Joe Biden and Xi Jinping is weeks away, with the Chinese leader attending the Asia-Pacific Economic Cooperation Forum in San Francisco.

China has sharply criticized the USA over its export controls. But in recent visits to Beijing, U.S. officials have stressed that while the Biden administration wants more engagement, it would not shy away from taking national security measures if necessary.

Graphics processors from Nvidia, AMD and Intel have become an essential component for training large AI models for tech companies, governments and startups, sparking a rush for the latest chips.

Shares of Nvidia, which previously said up to 25 percent of its data center chip revenue comes from China, fell about 6 percent in early trading in New York after the updated rules were announced. AMD and Intel were both about 3 percent lower.

After introducing last year’s rules, Nvidia developed new versions of its top H100 and A100 GPUs specifically for Chinese customers, bringing them below the performance threshold set by the US.

Chinese tech companies are rushing to buy these modified H800 and A800 GPUs, which are crucial to generative AI, amid fears that the US would tighten restrictions.

A US official said the new rule would prevent Nvidia from selling A800 and H800 GPU chips in China. The updated rules also affect Gaudi2, an Intel AI chip. A second official said the administration took into account how groups “tried to circumvent our parameters” when crafting the update.

Nvidia CEO Jensen Huang told the Financial Times earlier this year that the controls in 2022 had left the Silicon Valley company’s “hands tied behind its back” as sales of its most advanced chips to China were banned . He said further restrictions could cause serious harm to U.S. chipmakers by hurting their ability to finance investments.

“We comply with all applicable regulations while working to deliver products that support thousands of applications across many different industries,” Nvidia said Tuesday. “Given the global demand for our products, we do not expect a significant impact on our financial results in the near term.”

Intel said it would “review the rules and assess the potential impact.” AMD did not immediately respond to a request for comment.

“The most immediate impact will be that China will be cut off from advanced AI chips, including the modified versions of chips that Nvidia developed specifically to comply with last year’s controls,” said Gregory Allen, an AI expert at CSIS. Think tank. “Now [Chinese companies] We are looking at years in which the AI ​​chips that China has access to will be significantly inferior to those in the West.”

Under the 2022 rule, the U.S. banned the export of chips that exceeded two thresholds: one for performance and one for the speed at which the chips communicate with each other. The latter replaces the trading department with a “performance density” that is explicitly aimed at preventing companies from finding workarounds.

The revised export controls will ban the sale to Chinese companies of data center chips that can operate at speeds of 300 teraflops – meaning they can compute 300 trillion operations per second – and more.

Sales of chips with speeds of 150 to 300 teraflops will be blocked if they have a power density of 370 gigaflops (billion bills) per square millimeter or more. Chips that operate at these speeds but lower power densities fall into a “gray zone,” meaning companies must notify the government about sales to China.

Raimondo said the rules would exempt chips for consumer products, such as smartphones and games. However, officials said exporters would have to notify the government if they exported chips at speeds of more than 300 teraflops.

The updated rules also expand the list of chip manufacturing tools that cannot be sold to China. The second official said the US would also add two Chinese groups to the “entity list,” which would make it extremely difficult for them to obtain US technology. He said the two groups were involved in developing chips that undermined U.S. national security.

ASML, one of the top suppliers of advanced chip-making equipment, said it expects the new rules to apply to “a limited number of factories in China” engaged in the advanced chip manufacturing it supplies.

Netherlands-based ASML, whose shares fell about 2 percent after the new controls were announced, said it “does not expect these measures to have a material impact on our financial outlook for 2023 and our longer-term scenarios for 2025 and 2030.” “.

Source : www.ft.com

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