Joe Biden Considers Closing Chinese Companies' Opportunity Accessing AI Semiconductors From US

President Joe Biden wants to close the gap that gives Chinese companies access to artificial intelligence (AI) chips from the US (photo: twitter @potus)

JAKARTA - President Joe Biden's administration is considering closing a gap that gives Chinese companies access to artificial intelligence (AI) chips from the United States, through units located overseas.

The United States last year rocked relations with Beijing when it revealed new shipments of AI chips and chipmaking tools to China, in an effort to halt the Bamboo Curtain country's military advances. The rules will be tightened in the coming days. A person familiar with the situation said the move could be included in the new movement.

Early in the administration, the Biden administration allowed overseas subsidiaries of Chinese companies to have unimpeded access to the same semiconductors. This means they can easily be smuggled into China or accessed remotely by China-based users.

As reported by Reuters in June, chips banned by US regulations could be purchased from vendors in the famous Huaqiangbei electronics area in the city of Shenzhen.

Washington is now considering ways to close the gap, a source said.

Efforts to close the gap show how difficult it will be for the Biden administration to cut off China from the best AI technology and how difficult it will be to close any gaps in export controls.

“Absolutely, Chinese companies are buying chips for use in data centers overseas,” said Greg Allen, a director at the Center for Strategic and International Studies, who noted that Singapore is a big hub for cloud computing.

The Commerce Department declined to comment. A representative from the Chinese Embassy in Washington did not immediately respond to a request for comment. China's Ministry of Commerce has previously accused the US of abusing export controls and called on the US to "stop them as unreasonable towards Chinese companies."

While it would be legal for the U.S. to ship such AI chips to mainland China, experts say it is very difficult for the United States to oversee such transactions, noting that China-based employees can legally access chips in foreign subsidiaries remotely as well.

“The truth is, we don't know how big this problem is,” said Hanna Dohmen, Research Analyst at Georgetown University's Center for Security and Emerging Technology (CSET).

The United States has sought to halt advances in China's artificial intelligence capabilities, which are helping the country's military develop unmanned combat systems, according to a report in The International Affairs Review, which is affiliated with George Washington University's School of International Affairs.

China's AI capabilities depend on its access to US chips. CSET found in a June 2022 report that of the 97 individual AI chips acquired through Chinese military tenders during an 8-month period in 2020, almost all were designed by US-based companies, such as Nvidia, Xilinx, Intel, and Microsemi.

Washington has been working to close other gaps that could allow AI chips to enter China. In August, they told Nvidia and AMD to limit shipments of AI chips to other regions outside China, including several countries in the Middle East.

Sources say new rules on AI chips expected this month will likely apply similar restrictions more broadly to all companies in the market.

It's less clear how the US government can close gaps that allow Chinese parties to access US cloud providers such as Amazon Web Services, which give their customers access to the same AI capabilities. But sources say the Biden administration is also struggling with the issue.

"People in China can legally access the same chips from anywhere in the world. There are no rules about how they can be accessed," said Timothy Fist, a fellow at the Center for a New American Security, a Washington-based think tank.