US Restricts Nvidia Made-for-China Chips in New Sale Rules

The US is restricting the sale of chips that Nvidia Corp. designed specifically for the Chinese market, part of sweeping new updates to export curbs that are designed to block China’s access to highly advanced semiconductor technology.

(Bloomberg) — The US is restricting the sale of chips that Nvidia Corp. designed specifically for the Chinese market, part of sweeping new updates to export curbs that are designed to block China’s access to highly advanced semiconductor technology. 

The tighter controls will target Nvidia’s A800 and H800 chips, a senior US official said, which the American firm created for export to the Asian country after the Biden administration introduced its initial restrictions last October. Those curbs, including the updated rules released Tuesday, aim to prevent China from accessing cutting-edge technology with military uses.

The new rules also require companies to notify the US government before selling chips that fall below the controlled threshold, as Bloomberg reported earlier. Top-of-the-line chips are best for powering artificial intelligence models, a senior administration official said. But with a lot of money and a little jury-rigging, a whole class of slightly inferior chips could also be used for AI and supercomputing and therefore pose a national security risk, the official said.

Nvidia Corp. shares were down around 3.6% in pre-market trading as of 9:11 am New York time.

Read More: US to Tighten Rules Aimed at Keeping Advanced Chips Out of China

The US wants to monitor that so-called gray zone activity, the official added, while declining to comment on the specific parameters of which chips will be affected. The administration will review company notifications within 25 days, the official said, to determine whether firms need a license to sell those chips to China. 

“It’s difficult to draw a bright line between military and commercial technology,” US Commerce Secretary Gina Raimondo told reporters ahead of publication of the rule. “There are often dual-use technologies — and the same technologies that fuel commercial exchange, unfortunately, sometimes can also allow our competitors to modernize their military, surveil their citizens and solidify oppression.”

But the US doesn’t want to be more restrictive than necessary, Raimondo said, emphasizing a consistent message from the Biden administration that Washington doesn’t seek to hurt China’s economy. 

Chinese Foreign Ministry spokeswoman Mao Ning said Monday at a regular press briefing in Beijing that her nation opposed “the US politicizing, instrumentalizing and weaponizing trade and tech issues.”

Washington relented in one key area following a year of public comment on the initial rule: The updated curbs broadly allow the sale of advanced commercial chips to Chinese companies for use in consumer products like smartphones, computers and electric vehicles, as Bloomberg reported earlier. But the Biden administration will restrict the most advanced consumer chips — like those used in AI data centers — and impose a notification process on a select number of varieties just behind the cutting edge.

The administration will also require firms to obtain a license to sell chips to more than 40 countries that Chinese firms could use as intermediaries to skirt US controls. And it will add two Chinese businesses and their subsidiaries to a trade restriction list that mandates companies to obtain a US government license before shipping to those firms. 

The US is also expanding the scope of manufacturing gear subject to restrictions, said senior administration officials, without specifying the exact equipment. Asked whether the US would restrict less advanced DUV machines, which are mainly supplied by Dutch chip equipment leader ASML Holding NV, an administration official said that Washington has worked with the Netherlands on the policy. 

ASML’s chief executive officer publicly opposed the initial US restrictions, and it took months before the US was able to get its key allies in Amsterdam and Tokyo on board.

The updated rules won’t include restrictions on access to US or allied cloud computing services, though the administration will issue a request for comment to better understand potential national security risks associated with this access — and options to potentially address them.

–With assistance from Benjamin Purvis.

(Updates with market reaction in fourth paragraph)

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