US targets Chinese AI chip firms abroad in bid to close loopholes

WASHINGTON: According to four sources familiar with the topic, the Biden administration is considering removing a loophole that allows Chinese corporations to obtain American artificial intelligence (AI) chips through overseas divisions.

In an effort to thwart China's military advancements, the United States strained relations with Beijing last year when it announced new limitations on shipping of artificial intelligence chips and chipmaking tools to China. In the next few days, such regulations will be tightened. The measure may be subject to the new regulations, according to an insider.

The first series of restrictions put in place by the Biden administration allowed Chinese firms with abroad subsidiaries unrestricted access to the same chips, making them easy to smuggle into China or use remotely by users in the country.

In June, Reuters reported that sellers in the renowned Huaqiangbei electronics sector in the southern Chinese city of Shenzhen sold the identical chips prohibited by US rules.

Sources say that Washington is considering closing the loophole, which is new information.

The Biden administration's efforts to seal the loophole demonstrate how challenging it is to plug every opening in export controls and so deny China access to cutting-edge AI technology.

While Singapore is a major hub for cloud computing, "absolutely, Chinese firms are purchasing chips for use in data centres abroad," said Greg Allen, director at the Centre for Strategic and International Studies.

The Department of Commerce said they had no comment. There was no immediate response to a request for comment from the Chinese Embassy in Washington. The Chinese Ministry of Commerce has already demanded the US "stop its unreasonable suppression of Chinese companies" for allegedly violating export rules.

Shipping AI chips to mainland China would be against US law, but experts say it would be nearly impossible for the US to regulate such transactions, especially since personnel in China may legally access chips stored at international companies through remote access. Read More!