The U.S. Department of Commerce revised its semiconductor export control rules again in less than half a year, adding controls on some laptops. Chinese experts told Sputnik News that the U.S. government frequently adjusts its policies, causing semiconductor manufacturers to take new measures in line with the government’s new regulations. This makes the problem increasingly complex and makes the global semiconductor industry face huge uncertainty.
The U.S. Department of Commerce issued an announcement on March 29, Eastern Time, to revise the U.S. semiconductor export control rules issued in October 2023. It is reported that the new regulations, which are 166 pages long and will take effect on April 4, further clarify some contents. For example, restrictions on the export of chips to China will also apply to laptops containing these chips.
The “cat-and-mouse game” between the U.S. government and semiconductor manufacturers
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced two export control regulations in October 2022, restricting China’s ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. A year later, the Biden administration updated this export control rule to stop shipments to China of more advanced artificial intelligence chips designed by companies such as Nvidia.
US Commerce Secretary Gina Raimondo claimed that the new measures close “loopholes” in the regulations released in October 2022 and may be updated “at least annually.” The goal is to “limit China’s access to advanced semiconductors that can power breakthroughs in artificial intelligence and complex computers that are critical to (China’s) military applications,” she said, stressing that the administration has no intention of harming Beijing economically.
Since the United States banned Nvidia from selling A100 and H100 chips to China in 2022, the company released streamlined versions of the chips A800 and H800 as alternatives. However, due to new regulations released in October 2023 that set an upper limit on the computing power of chips, NVIDIA is no longer able to sell these two chips to China. Therefore, NVIDIA can only develop customized artificial intelligence chips for China again. In this regard, Chinese state-run media “Global Times” said that the U.S. government and Nvidia have launched a “cat-and-mouse game” of restrictions and counter-restrictions.
Professor Xu Canhao from Beijing Normal University-Hong Kong Baptist University Joint International College said in an interview with Sputnik News that although the U.S. government wants to control technology, semiconductor manufacturers and the market are trying to find ways to achieve cooperation, which makes this issue increasingly complex.
He pointed out, “First of all, the U.S. government does not want to interrupt the semiconductor trade with China because it is a huge source of profit. Secondly, they want to control China’s semiconductor technology at a lower level, one to two generations behind that of the United States. , so that they can maintain their technological advantage and sell semiconductor products with older technology. However, most of the semiconductor sales of large American companies come from the Chinese market. Nvidia CEO Jensen Huang once said that the Chinese market is indispensable to them Therefore, in the past six months, semiconductor manufacturers have adopted new circumvention measures against some previous policies, which is the fundamental reason why the U.S. government regularly upgrades or changes these policies at regular intervals.”
Frequent rule changes undermine global industry stability
Raimondo has warned that chipmakers will be prohibited from reworking chips if they redesign their products to circumvent export controls.
“I know there are some chip CEOs here who get a little grumpy with me when I do this because you’re losing revenue, ” Raimondo said at the Reagan National Defense Forum in California in December. “But that’s life. Protect. Our national security is more important than short-term revenue. If you redesign chips around specific ‘red lines’ that enable them to perform artificial intelligence, I would limit it the next day.”
The development of business and trade requires a stable environment. It is obvious that frequent changes in export control rules by the United States will cause chaos in the global semiconductor industry. Professor Xu Canhao emphasized, “If laws and regulations change frequently, it will be difficult to conduct business, especially in industries such as semiconductor R&D and manufacturing, which require a long cycle and contract execution may take several years. These changes will have a negative impact on overall trade and economic relations. There is a serious impact, there is no doubt about it.”
China’s response strategy: Grasping the market and improving strength
China is the world’s largest semiconductor market, with chip sales accounting for about one-third of the world’s total. Nvidia CEO Jensen Huang once told British media that U.S. export controls are like “our hands are tied behind our backs.” Huang Renxun also said that China has always been an important market for Nvidia, accounting for about 20% of the company’s revenue. The company also holds more than 90% of China’s $7 billion artificial intelligence chip market.
Therefore, Professor Xu Canhao believes that China can respond to the United States’ continuous tightening of semiconductor export controls by seizing market advantages and improving its own strength.
He said: “First of all, whether it is a company like Nvidia, an automobile manufacturer or an enterprise like Apple, they all occupy a huge share of the Chinese market. Therefore, the Chinese market is indispensable to them. Secondly, Chinese companies should also strengthen their own R&D and production capabilities, just like cultivating internal strength. If we become stronger, others will be less likely to easily control or restrict us.”
It is worth noting that restrictions on U.S. semiconductor exports to China may provide Chinese companies with opportunities to expand in the local market. It is reported that Nvidia recently launched a slower and less powerful processor that complies with U.S. export controls and can be sold in China. It is reported that this chip called GeForce RTX 4090D was launched in January this year, but Nvidia has encountered some resistance. Some giant companies in China said they did not want to buy the chip.
According to US media reports, Alibaba Group, Tencent, Baidu and Tik Tok parent company ByteDance have all said that because Nvidia has not yet provided the most powerful chips, they plan to significantly reduce the number of chips they order from the company this year . Reports say the performance gap between downgraded chips and locally made alternatives is much smaller, meaning the companies may start sourcing domestically.
Regarding the U.S. revision of semiconductor export control measures, a spokesman for the Chinese Ministry of Commerce responded on March 31 that the U.S. has overextended the concept of national security, arbitrarily modified rules, and tightened control measures, which not only creates conditions for normal economic and trade cooperation between Chinese and U.S. companies. This has created more obstacles, imposed a heavier compliance burden, and created huge uncertainty for the global semiconductor industry. This seriously affects the mutually beneficial cooperation between Chinese and foreign enterprises and damages their legitimate rights and interests. China firmly opposes this. China is the world’s largest semiconductor market. China is willing to work with all parties to strengthen mutually beneficial cooperation and promote the security and stability of the global semiconductor industry chain and supply chain.
