Background:
Last year, the U.S. rolled out measures restricting the shipment of AI chips and related tools to China. These steps aimed to counter China's military progression. However, a loophole allowed Chinese companies' overseas subsidiaries to continue accessing these restricted chips.

Key Developments:

• The Biden administration is actively looking to close this loophole, sources revealed. The move hasn't been reported until now.

• Overseas subsidiaries of Chinese companies have been getting the same semiconductors without any restrictions. This means these chips could be smuggled into China or remotely accessed.

• Previous reports indicated that chips, banned by U.S. regulations, were available for purchase in China's Huaqiangbei electronics district.

Industry Insight:
"Chinese firms are indeed buying chips for data centers abroad, with places like Singapore emerging as significant cloud computing hubs," stated Greg Allen from the Center for Strategic and International Studies.

Reactions:

• The Commerce Department chose not to comment on this matter.

• China's Ministry of Commerce previously accused the U.S. of misusing export controls and demanded an end to the "unreasonable suppression of Chinese companies."

Challenges:

• Enforcing such restrictions is challenging. Chinese personnel can legally access chips stationed at foreign subsidiaries.

• Hanna Dohmen of Georgetown University highlighted, "We aren't entirely sure about the scale of this issue."

Significance:
China heavily relies on U.S. chips for its AI advancements. A 2022 report revealed that nearly all AI chips acquired via Chinese military tenders were designed by major U.S. firms like Nvidia and Intel.

Future Outlook:

• Washington aims to close other loopholes that permit the entry of these chips into China. Previously, it asked tech giants like Nvidia and AMD to limit AI chip shipments not just to China but other regions as well.

• Upcoming rules on AI chip exports are likely to enforce these limitations on all market players.

• There are ongoing deliberations on how to regulate Chinese access to U.S. cloud services offering similar AI capabilities.

In conclusion, the U.S. is intensifying its efforts to control AI chip exports to China amidst rising tensions and concerns over national security. It remains to be seen how these potential regulations will impact the tech industry and the U.S.-China relationship.

source: Exclusive: Biden eyes adding AI chip curbs to Chinese companies abroad

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