How Biden’s AI Chip Regulations are Affecting Chinese Firms Abroad?

As per a source, the Joe Biden administration is considering removing a loophole that enables Chinese corporations to acquire American artificial intelligence (AI) chips through foreign divisions. Last year, in an effort to block China’s military advancements, the United States announced additional limitations on exports of AI chips and chipmaking tools to Beijing. This strained ties between Washington and Beijing. In the upcoming days, such regulations will likely get stricter.

In the initial wave of restrictions, the Biden administration left overseas subsidiaries of Chinese companies with unrestricted access to the same semiconductors. This made it easy to sneak these products into China or utilize them remotely by Chinese consumers.

According to Reuters, sellers in Shenzhen, a city in southern China’s renowned Huaqiangbei electronics district, sell the same chips that are prohibited by American legislation.

According to insiders, Washington is currently considering methods to address the loophole, which has not previously been announced. The actions taken to overcome the loophole demonstrate how difficult it is to close all export control gaps and how the Biden administration struggles to deny China access to cutting-edge AI technology.

The director of the Center for Strategic and International Studies, Greg Allen said,

“Absolutely, Chinese firms are purchasing chips for use in data centers abroad,” noting that Singapore is a big hub for cloud computing.

The Department of Commerce declined to comment. Requests for reaction from the Chinese Embassy in Washington were not immediately answered as well. The U.S. has been accused of misusing export restrictions in the past, and China’s Ministry of Commerce has urged Washington to “stop its unreasonable suppression of Chinese companies.”

Although it would be against the law in the United States to transport those AI chips to mainland China, analysts said it would be very challenging to monitor such transactions given that staff members in mainland China may legitimately access chips situated at overseas companies remotely.

An article in The International Affairs Review, a publication associated with the School of International Affairs at George Washington University, claims that the United States has been attempting to stop China’s development of artificial intelligence technology, which aids its military in creating unmanned combat weapons.

Access to US-manufactured chips is necessary for China to have a functional AI. The U.S.-based firms Nvidia, Xilinx, Intel, and Microsemi were responsible for designing virtually all of the 97 unique AI chips that were acquired through Chinese military contracts over an 8-month period in 2020, according to CSET’s June 2022 report.

It is less obvious how the American government would reduce the gap that allows Chinese parties to use American cloud services like Amazon Web Services, which provide their clients access to the same AI capabilities.

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