The US government has moved to halt the export of specific types of semiconductors to China, a bid to close regulatory loopholes that were announced in the previous year. This Tuesday, the Commerce Department revealed new regulations that strengthen export controls, first brought in October 2022.
US Commerce Secretary Gina Raimondo stated, "These updated rules will increase the effectiveness of our controls and shut off pathways to evade our restrictions." Raimondo went on to assert, "We will continue to work diligently to protect our national security by limiting access to critical technologies and vigilantly enforcing our rules, all while keeping unintentional impacts on trade flows to a minimum."
The newly implemented rules target advanced artificial intelligence chips, such as Nvidia’s H800 and A800 products, as stated in the US regulatory filing. The export restrictions have also broadened their reach to other countries, extending past China and Macao to 21 additional countries with which the US maintains an arms embargo, including Russia and Iran. These restrictions have significantly impacted American chipmakers shares and are slated to take effect in thirty days.
The original regulations aimed to impede China’s acquisitions of advanced computing chips and limit their ability to manufacture advanced weapon systems. However, senior administration officials have suggested these regulations needed updating due to advancements in technology. The latest regulations, however, do not apply to all chips.
During her visit to China in August, Raimondo affirmed the administration's intention to slow the advancement of China’s military technologies. She also highlighted that Washington decided against broadening restrictions on chips for other applications. According to senior administration officials, chips used in video games, phones, and electric cars were intentionally excluded from the new rule set.
Nonetheless, these assurances have done little to appease Beijing, which promises to assert itself as a global technological leader.
Before the new legislation was officially announced on Monday, China’s Foreign Ministry criticized the US's plan, voicing their opposition to the politicization and weaponization of trade and tech issues. Spokesperson Mao Ning cautioned, “The US should cease destabilizing the global industrial supply chain. We will continue to monitor the situation very closely, standing firm to protect our rights and interests.”
Following the disclosure of new export restrictions on Tuesday, shares of US chipmakers took a hit, causing Nvidia’s (NVDA) stock to fall by 4.7%, while Intel (INTC) slipped by 1.4% and AMD (AMD) shares dropped 1.2%.
In a filing, Nvidia confirmed that the new rules would introduce new licensing requirements for exports to China and other markets such as Saudi Arabia, the UAE, and Vietnam. Despite this, the company anticipates minimal impact on their financial results, given the strength of demand for their products worldwide.
The broader US chipmaking sector is also assessing the effect of these new rules. The Semiconductor Industry Association recognized the need to protect national security but warned that overly broad and unilateral controls might result in harm to the US semiconductor ecosystem as international customers look elsewhere.
In Europe, the measures are also being evaluated. On the same day, ASML, the Dutch chipmaking equipment manufacturer, expressed it was looking into the regulations' ramifications, though it anticipates no severe impact on its forecast for 2023.
Also, on Tuesday, the Department of Commerce added 13 Chinese companies to a list of firms prohibited from conducting business with US companies for national security concerns. The list includes two Chinese startups, Biren Technology, and Moore Thread Intelligent Technology, and their subsidiaries. The department accuses these companies of being involved in the development of advanced computing chips that have been discovered to engage in activities contrary to US national security.
