The administration of US President Joe Biden is considering closing a loophole that gives Chinese companies access to US artificial intelligence (AI) chips through units overseas, four people familiar with the matter said.
The US last year shook relations with Beijing when it unveiled new restrictions on shipments of AI chips and chipmaking tools to China, seeking to thwart its military advances. Those rules are set to be tightened in the coming days. A person familiar with the situation said the measure could be included in those new restrictions.
In the initial round of curbs, the Biden administration left overseas subsidiaries of Chinese companies with unfettered access to the same semiconductors, meaning they could easily be smuggled into China or accessed remotely by China-based users.
Photo: AP
Reuters reported in June that the very chips barred by US regulations could be purchased from vendors in the Huaqiangbei (華強北) electronics area in the southern Chinese city of Shenzhen.
Washington is now mulling ways to close the loophole, the sources said.
The efforts to close the loophole show how the Biden administration is struggling to cut China off from top AI technology and how difficult it is to plug every gap in export controls.
“Absolutely, Chinese firms are purchasing chips for use in data centers abroad,” said Greg Allen, a director at the Center for Strategic and International Studies, adding that Singapore is a big hub for cloud computing.
The US Department of Commerce declined to comment.
A representative from the Chinese embassy in Washington did not immediately respond to a request for comment.
The Chinese Ministry of Commerce has previously accused the US of abusing export controls and called for it to “stop its unreasonable suppression of Chinese companies.”
While it would be illegal under US law to ship AI chips to China, it is difficult for the US to police transactions, experts said, adding that China-based employees could legally access the chips at foreign subsidiaries remotely as well.
“We don’t actually know how big a problem this is,” said Hanna Dohmen, a research analyst at Georgetown University’s Center for Security and Emerging Technology (CSET).
The US has been seeking to halt the rise of China’s AI capabilities, which helps its military to develop uncrewed combat systems, according to a report in The International Affairs Review, affiliated with George Washington University’s School of International Affairs.
China’s AI capabilities depend on its access to US chips.
CSET said in a report in June last year that out of 97 individual AI chips procured via Chinese military tenders over an eight-month period in 2020, nearly all of them were designed by US-based companies Nvidia, Xilinx, Intel and Microsemi.
Washington has been working to close other loopholes that allow the AI chips into China.
In August, it told Nvidia and AMD to restrict shipments of their AI chips beyond China to other regions, including some countries in the Middle East.
The sources said the new rules on AI chips expected this month would likely apply those same restrictions more broadly to all companies in the market.
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