In this illustration from February 17, 2023, semiconductor chips can be seen on a circuit board. Portal/Florence Lo/Illustration/File Photo Acquire License Rights
Oct 12 (Portal) – The Biden administration is considering closing a loophole that gives Chinese companies access to American artificial intelligence (AI) chips through units abroad, according to four people familiar with the matter.
The United States rattled relations with Beijing last year when it announced new restrictions on shipments of AI chips and chip-making tools to China in a bid to thwart its military advances. These rules are set to be tightened in the coming days. A person familiar with the situation said the measure could be included in these new restrictions.
In the first round of restrictions, the Biden administration left overseas branches of Chinese companies with unfettered access to the same semiconductors, meaning they could easily be smuggled into China or accessed remotely by users based in China.
Portal reported in June that the very chips banned under U.S. regulations could be purchased at dealers in the famous Huaqiangbei electronics district in the southern Chinese city of Shenzhen.
Washington is now considering how to close the loophole, a move that has not previously been reported, sources said.
The effort to close the gap shows how the Biden administration is struggling to cut China off from leading AI technology and how difficult it is to close any loophole in export controls.
“Chinese companies are definitely buying chips for use in data centers overseas,” said Greg Allen, director at the Center for Strategic and International Studies, noting that Singapore is a major hub for cloud computing.
The Commerce Department declined to comment. A representative at the Chinese Embassy in Washington did not immediately respond to a request for comment. China’s Commerce Ministry has previously accused the US of abusing export controls and called on it to “end its undue repression of Chinese companies.”
While it would be illegal under U.S. law to ship these AI chips to mainland China, it would be very difficult for the United States to monitor these transactions, experts said, pointing out that China-based employees can legally access the operations remotely Chips located in foreign subsidiaries could also be accessed.
“We don’t actually know how big the problem is,” said Hanna Dohmen, a research analyst at Georgetown University’s Center for Security and Emerging Technology (CSET).
The United States is trying to halt the rise of artificial intelligence in China, which is helping the military develop unmanned combat systems, according to a report in The International Affairs Review, affiliated with George Washington University’s School of International Affairs.
China’s AI capability depends on its access to US chips. CSET noted in a June 2022 report that of the 97 individual AI chips procured through Chinese military tenders over an eight-month period in 2020, almost all were from U.S.-based companies Nvidia, Xilinx, Intel and Microsemi were developed.
Washington has been working to close additional loopholes that allow AI chips to be deployed to China. In August, the company asked Nvidia and AMD to restrict shipments of the AI chips beyond China to other regions, including some countries in the Middle East.
Sources said the new AI chip rules expected this month will likely apply the same restrictions more broadly to all companies in the market.
It’s less clear how the U.S. government might close the loophole that allows Chinese parties to access U.S. cloud providers like Amazon Web Services, which give their customers access to the same AI capabilities. However, sources say the Biden administration is also grappling with this issue.
“Chinese people can access the same chips completely legally from anywhere in the world. There are no rules about how they can be accessed,” said Timothy Fist, a fellow at the Washington-based think tank Center for a New American Security.
Reporting by Alexandra Alper and Karen Freifeld; Editing by Chris Sanders and Anna Driver
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