The Biden administration is exploring the possibility of closing a loophole that currently allows Chinese companies to acquire American artificial intelligence (AI) chips through overseas subsidiaries, according to information from four individuals familiar with the situation.
In the previous year, the United States strained its relations with Beijing by introducing new restrictions on the export of AI chips and chipmaking tools to China, aimed at impeding its military advancements. These regulations are expected to be further reinforced in the near future, with sources suggesting that this measure might be included in the upcoming revisions.
During the initial round of restrictions, the Biden administration granted overseas subsidiaries of Chinese companies unrestricted access to the same semiconductors, enabling these chips to be potentially transported to China or accessed remotely by users in China.
In June, Reuters disclosed that the AI chips prohibited by U.S. regulations could be obtained from vendors in the renowned Huaqiangbei electronics district located in the southern Chinese city of Shenzhen.
The U.S. government is now contemplating ways to close this loophole, a development not previously disclosed. This effort underscores the challenges the Biden administration faces in limiting China’s access to cutting-edge AI technology and the complexities of sealing every gap in export controls.
Greg Allen, a director at the Center for Strategic and International Studies, remarked, “Chinese companies are undoubtedly acquiring chips for use in data centers abroad,” noting that Singapore is a significant hub for cloud computing.
The Commerce Department declined to comment on the matter. The Chinese Embassy in Washington did not provide an immediate response to requests for comment. China’s Ministry of Commerce has previously accused the U.S. of misusing export controls and urged it to “cease its unreasonable suppression of Chinese companies.”
While sending AI chips to mainland China would violate U.S. law, experts emphasize the difficulty of monitoring and regulating such transactions, especially as China-based employees can legally access chips located at foreign subsidiaries remotely.
Hanna Dohmen, a Research Analyst at Georgetown University’s Center for Security and Emerging Technology (CSET), stated, “We don’t have a clear understanding of the extent of this issue.”
The United States has been striving to hinder the advancement of China’s artificial intelligence capabilities, which contribute to its military’s development of unmanned combat systems, as reported in The International Affairs Review, associated with George Washington University’s School of International Affairs.
China’s AI capabilities heavily rely on its access to U.S.-made chips. According to a June 2022 report by CSET, out of 97 AI chips obtained through Chinese military procurement processes over an eight-month period in 2020, nearly all were designed by U.S.-based companies such as Nvidia, Xilinx, Intel, and Microsemi.
Washington has been actively working to close other loopholes that allow AI chips to enter China. In August, it instructed Nvidia and AMD to restrict the export of AI chips to regions beyond China, including some countries in the Middle East.
Sources suggest that the upcoming AI chip regulations this month will likely expand these restrictions to encompass a broader range of companies in the market.
It remains less clear how the U.S. government will address the loophole that permits Chinese entities to access U.S. cloud providers like Amazon Web Services, which offer their customers access to similar AI capabilities. Nonetheless, sources indicate that the Biden administration is grappling with this issue as well.
“Chinese individuals can access the same chips from any location worldwide without legal constraints on how they can be obtained,” emphasized Timothy Fist, a fellow at the Center for a New American Security, a Washington-based think tank.
Topics #Ai Chips #Chinese Access #upcoming revisions
