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US limits sales of artificial intelligence chips to China

US chipmakers Nvidia and AMD have been required to obtain a new licence, effective immediately, to address the risk of semiconductors being "used in, or diverted to a 'military end use'... in China and Russia".

Two of America's top chipmakers have been ordered by US regulators to halt exports of some of their artificial intelligence (AI) technology to China.  

In a regulatory filing, Nvidia said that it had been told by the US Department of Commerce that the requirement was due to a potential risk of the products being used by, or diverted to, a "military end-user". 

The restrictions cover Nvidia's A100 and forthcoming H100 integrated circuits, and any systems that include them. The enforcement of this measure would threaten $400m (345m) worth of business for the company, according to the filing. AMD has also told CNN that the same restrictions have been applied to the company with regard to its shipments of MI250 integrated circuits to China.

“The US government has imposed a new license requirement, effective immediately, for any future export to China (including Hong Kong) and Russia of the Company’s A100 and forthcoming H100 integrated circuit,” said Nvidia in the SEC filing.

The company said the ban could interfere with the development of the H100, the flagship chip Nvidia announced earlier this year. It also added that the company does not sell products to customers in Russia.

Nvidia's shares were down by 6.6 per cent while AMD slipped 3.7 per cent shortly after the news broke, in what Dan Ives of Wedbush Securities described to the BBC as a “gut punch”. 

In response, the US Department of Commerce declined to reveal the criteria used to decide which AI chips could or could not be shipped to China but said it is reviewing its China-related policies and practices “keep advanced technologies out of the wrong hands".

“While we are not in a position to outline specific policy changes at this time, we are taking a comprehensive approach to implement additional actions necessary related to technologies, end-uses and end-users to protect US national security and foreign policy interests,” a spokesperson told Reuters.

A Nvidia spokesperson told the BBC it was liaising with customers in China "to satisfy their planned or future purchases with alternative products". Meanwhile, an AMD spokesperson said the rules, which would prevent the shipment of its MI250 chips to China, were not expected to have "a material impact" on business.

The US regulators' decision is the latest instance of an escalation of a trade dispute between the US and China. 

The US has restricted China’s access to semiconductor tech since at least 2019 when the Trump administration banned Huawei from buying vital US technology. Last month, the US also prohibited the export of four technologies tied to semiconductor manufacturing, citing they were “vital to national security” and signed a “historic” bill aimed at boosting the domestic production of semiconductors. 

The Chips Act was interpreted as a direct response to the semiconductor shortage, which has forced companies including Ford, Jaguar Land Rover, Volkswagen, General Motors, Nissan, Daimler, BMW, Renault and Toyota to shut factories, scale back production or exclude high-end features such as integrated satellite navigation systems. 

Earlier this year, Raimondo warned that the global chip crisis is expected to last through 2023 and perhaps longer as manufacturing still struggles to keep up with demand.

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