- Biden’s Commerce Department is issuing new semiconductor export rules that affect Nvidia.
- The rules categorize countries for GPU export controls, affecting Nvidia’s market.
- Critics argue that regulations could stifle AI innovation. Supporters say they will keep the US on top.
The Biden administration’s Commerce Department on Monday released 168 pages of new regulations for the US semiconductor industry that could drastically change Nvidia’s year.
The new rules target exports of graphics processing units, the types of very powerful chips made by Nvidia and challenger AMD. Global data centers are filling up with GPUs, and Nvidia has so far taken about 90% of that market share.
Highly complex chips like GPUs are mostly made in Taiwan, but most of the companies that design them are based in the US and so their products fall within the Commerce Department’s jurisdiction.
“To enhance US national security and economic power, it is essential that we keep this critical technology offshore and that the world’s AI operates on American rails,” the White House said in a statement. added that advanced computing in the wrong hands could lead to “the development of weapons of mass destruction, the support of powerful offensive cyber operations, and the facilitation of human rights abuses such as mass surveillance.”
In response to earlier export restrictions, Nvidia created a less powerful chip model just for the Chinese market to continue doing business there after the Biden administration changed the rules in 2022.
The new regulations go further – grouping countries into three categories and imposing different export controls on each.
The first is a pool of 18 allies to which GPUs can be sent freely. These are Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Republic of Korea, Spain, Sweden, Taiwan and United Kingdom.
The second group is listed as “countries of concern” where exports of cutting-edge GPUs will be completely banned. These are China, Hong Kong and Macau, Russia, Iran, North Korea, Venezuela, Nicaragua and Syria.
All other countries will be subject to a 100,000 GPU cap. The rules provide for a vetting process for larger orders, in which businesses seeking to establish larger clusters in these countries will need US government approval to do so.
The administration said the regulations had provisions that would keep small orders of the chips flowing to research institutions and universities.
Nvidia has opposed the regulation along with the Semiconductor Industry Association.
“While disguised as an ‘anti-China’ measure, these rules would do nothing to enhance US security,” Ned Finkle, Nvidia’s VP of government affairs, wrote in a statement on the company’s website. company website.
Impact on Nvidia
Any restrictions on the sale of GPUs anywhere is bound to hit Nvidia’s sales.
“The Biden administration now seeks to limit access to common computing applications with its unprecedented and misguided ‘AI Diffusion’ rule, which threatens to disrupt innovation and economic growth around the world,” Finkle wrote.
But will they loosen the rules or shift sales?
Chris Miller, author of “Chip War” and a leading expert on the semiconductor industry, told Business Insider that he was unsure whether the overall volume of GPUs sold would be significantly affected since demand for Nvidia’s products is so high.
“I suspect these rules will generally have the effect of shifting data center construction toward American firms,” Miller said.
If demand falls, “it will change because of a reduction in demand for GPUs from countries or companies that are not willing to rely on US cloud providers,” Miller said.
Draft rules had been circulating before Monday’s announcement, and reactions from tech executives have been fierce.
Oracle EVP Ken Glueck first posted about them in mid-December and again in early January.
Both Finkle and Glueck ticked the country boxes as the most important element introduced.
“The extreme ‘country cap’ policy will affect mainstream computers in countries around the world, doing nothing to promote national security, but instead pushing the world toward alternative technologies,” Finkle said in an emailed statement Friday. .
It is particularly notable that Singapore, Mexico, Malaysia, the United Arab Emirates, Israel, Saudi Arabia and India are not in the unlimited tier of countries, Glueck noted.
Excluding some Middle Eastern countries could seriously alter the course of building global AI infrastructure, Miller said.
“The main impact of these controls is that they make it much more likely that the most advanced AI systems will be trained in the US as opposed to the Middle East,” Miller said.
“Without these controls, wealthy Middle Eastern governments would have been able to some extent to persuade US firms to train high-end AI systems in the Middle East by providing subsidized data centers. Now this does not it will be possible, so American firms will train the systems in the US,” said Miller.
Glueck wrote that country quotas were the worst concept in the draft regulations, which will be officially released Wednesday, according to the Federal Register.
“Controlling GPUs makes no sense when you can achieve parity by simply adding more, if less powerful, GPUs to solve the problem,” Oracle’s Glueck wrote in December. “The problem with this proposal is that it is assumed that there is No. other non-US suppliers from which GPU technology can be purchased,” he continued.
Republican support
The fate of Biden’s unprecedented export control rules is uncertain given their timing.
Monday’s statement from Nvidia’s Finkle referenced the Trump administration, stating that in his first term, Trump “laid the foundation for America’s current strength and success in AI.”
The new rules are subject to a 120-day comment period before they become enforceable. President Biden will leave office when they take effect.
Although they came from an outgoing Democratic administration, the rules have some support from the President-elect.
Republican Congressman John Moolenaar and Raja Krishnamoorthi, chairman and senior member of the Chinese Communist Party’s House Select Committee, are in favor of the framework.
“GPUs, or any site hosting Huawei cloud computing infrastructure should be restricted from accessing the model weights of dual-use closed-weight AI models,” the two lawmakers published in a written statement.
Matt Pottinger, who served on the National Security Council in Trump’s first term and is the current chair of the China program at the Foundation for Defense of Democracies along with Anthropic CEO Dario Amodei, wrote an op-ed in the Wall Street Journal on January 6. They suggest that existing export restrictions have been successful, but still leave room for China to set up data centers in friendly third-party countries, so more restrictions are needed.
“Skeptics of these restrictions argue that countries and companies subject to the rules will simply switch to Chinese AI chips. This argument overlooks that American chips are superior, giving countries an incentive to follow US rules,” Pottinger writes. and Amodeus.
“Countries that want to reap massive economic benefits will have an incentive to follow the American model rather than use China’s inferior chips,” they continued.
Miller confirmed that the fact that China is still buying Nvidia’s “failed” GPUs is enough of a sign that domestically designed chips are not yet competitive.
“As long as China imports GPUs from the US, it will not be able to export, in which case these controls will be effective because there is no alternative source of high-end GPUs,” Miller said.
But Huawei is catching up, said Alvin Nguyen, senior analyst at Forrester. According to him, additional US export controls could accelerate this.
“They’ve caught up a generation behind Nvidia,” Nguyen said.
Another concern is that limiting the flow of advanced chips could segment the economic opportunity for AI to spread evenly across the globe.
“If you’re not working with the best infrastructure, the best models, you may not be able to leverage the data you have — creating the rich and the not,” Nguyen said.
