Untitled

A view of a Nvidia logo at their headquarters in Taipei

A view of a Nvidia logo at their headquarters in Taipei, Taiwan May 31, 2023. REUTERS/Ann Wang/File photo Acquire Licensing Rights

SAN FRANCISCO, Oct 18 (Reuters) – While stripping China’s access to key U.S. artificial intelligence chips, the Biden administration’s sweeping new rules also quietly threw Nvidia (NVDA.O), Intel (INTC.O) and Advanced Micro Devices (AMD) (AMD.O) a potential lifeline to preserve lucrative business in one of the world’s biggest chip markets.

Buried deep in more than 400 pages of rules issued on Tuesday, officials at the U.S. Bureau of Industry and Security (BIS) said they are open to the semiconductor industry’s input for finding ways to keep sending AI chips to China for small and medium-sized systems.

The rules were designed to curtail China’s ability to exploit American chips to build massive supercomputers that can be used to create technologies similar to OpenAI’s ChatGPT and could also be used for military purposes, officials said.

Thomas Krueger, a former U.S. National Security Council export control official, said “the organizing principle for all these rules is to keep them focused on those capabilities that can enable Chinese military systems. They’re not interested in going after broad consumer applications. They’re really trying to thread that needle.”

U.S. officials asked for input in devising a “tamperproof” way to keep systems that might contain up to 256 AI chips from being strung together into a supercomputer.

“This approach could constrain (controlled AI chips) from being used to train large dual-use AI foundation models with capabilities of concern, while allowing AI training capabilities at a small or medium scale,” the BIS wrote.

Nvidia, Intel and AMD declined to comment. Nvidia shares closed down 4.67% on Tuesday after the new rules were announced.

The other primary gift that U.S. officials gave Nvidia, Intel and AMD was hobbling their most capable Chinese competitors.

New rules will make it nearly impossible for Moore Threads and Biren, two well-funded Chinese startups founded by Nvidia veterans, to have their designs manufactured using cutting-edge chipmaking technology.

That means whatever Nvidia is able to sell to China will likely be Chinese buyers’ best legal option.

“Our assumption is that (Nvidia) will quickly redesign a chip to meet new standards with relatively immaterial disruptions to the current business outlook,” analysts at investment bank Piper Sandler wrote in a note to clients.

TOOL RULES TIGHTENED

As part of the new rules published on Tuesday that take effect in 30 days, U.S. officials targeted China’s chip manufacturers by restricting the export of advanced chipmaking equipment known as immersion deep ultraviolet (DUV) lithography machines if they contain any American parts.

“What they’re really doing is closing all the doors,” TechInsights analyst Dan Hutcheson said, adding the new rules close off a substantial amount of potential future developments. “They’re basically trying to future-proof the document.”

The DUV machines are not produced by any American toolmakers, but are made by Japan’s Nikon (7731.T) and the Netherlands’ ASML (ASML.AS).

The DUV rules announced on Tuesday codified diplomatic work between the U.S., Japan and the Netherlands to institute similar controls on sending the machines to China, said Clete Willems, a trade and policy attorney with Akin Gump.

While immersion DUV machines cannot product cutting-edge chips, they can come close and are likely what was recently used by Huawei’s chip manufacturing partners to create a new smartphone chip for its Mate 60 Pro, according to analysts.

“This control alone will constrain China’s ability to expand advanced node semiconductor manufacturing for many years,” said Gregory Allen, a director at the Center for Strategic and International Studies.

“If spare parts and components for the equipment can be effectively controlled, the new regulations may degrade the advanced node manufacturing facilities that China currently has in operation.”

Instead of the broad swaths of tools blocked by last year’s export restrictions, officials on Tuesday narrowed them to target specific technologies and techniques found in the complex machines needed to build advanced transistor designs, according to David Kanter, President of Real World Insights.

By narrowing the equipment that is blocked, the rules allow the toolmakers to sell equipment that is made to build much older chips without fear of running afoul of the government restrictions.

Reporting by Stephen Nellis and Max A. Cherney in San Francisco; Editing by Kenneth Li and Jamie Freed

Our Standards: The Thomson Reuters Trust Principles.

Acquire Licensing Rights, opens new tab

Go to Source