Biden stifles global innovation in the name of dispute with China

US President imposes export controls on AI chips to contain China, but industry warns that measure could weaken innovation and favor competitors

The U.S. is imposing expansive export controls on chips used in artificial intelligence in an effort to make it harder for China and other adversaries to access advanced technologies with military applications.

On Monday, the Biden administration unveiled a new export control regime that grants 20 close allies and partners unfettered access to AI-related chips while imposing licensing requirements on most other countries. The move faced immediate strong opposition from the US semiconductor industry.

The policy aims to make it difficult for China to use other countries to bypass existing U.S. restrictions and acquire technology that can be used in applications such as modeling nuclear weapons and hypersonic missiles.

“The new rule provides greater clarity to our international partners and industry and combats serious violations and national security risks associated with countries of concern and malicious actors who may seek to use advanced American technologies against us,” said Jake Sullivan, advisor to US national security.

The regime creates a three-tier licensing system for chips used in data centers that process AI calculations. The first tier, which includes G7 members and countries such as Australia, New Zealand, South Korea, Taiwan, the Netherlands and Ireland, will not face restrictions.

The third tier includes nations such as China, Iran, Russia and North Korea, to which, in practice, American companies will not be able to export. The intermediate tier, with more than 100 countries, will have limits and licensing requirements for export volumes above these restrictions.

Commerce Secretary Gina Raimondo said the policy ensures the new controls “will not stifle U.S. innovation or technological leadership.” However, the measure provoked a strong reaction from the US semiconductor industry.

The Semiconductor Industry Association and the Foundation for Information and Technology Innovation issued strong statements asserting that the policy would only give a competitive advantage to American companies’ foreign competitors.

Industry sources, speaking on condition of anonymity, criticized the move, calling it an unprecedented step that shows Washington is trying to micromanage the global chip supply chain to the detriment of its allies and companies such as Nvidia, AMD, Dell and Supermicro. .

“Although disguised as an ‘anti-China’ measure, these rules will do nothing to improve US security. The new rules would control technologies already widely available in gaming PCs and consumer hardware,” Nvidia said in a blog post.

“Biden’s new rules would only weaken America’s global competitiveness, undermining the innovation that has kept the country leading,” he added.

However, Jimmy Goodrich, a senior adviser at the Rand Corporation, said the rules constitute an “important milestone” that bolsters national security without giving Chinese AI companies a competitive advantage over American ones.

“The uncontrolled outsourcing of massive AI data centers to countries with questionable ties to foreign adversaries poses clear risks to national and economic security,” Goodrich said. “The milestone still allows millions of chips to continue circulating around the world, and concerns about Chinese competition in AI chips are currently overblown.”

Industry sources questioned whether the US would be prepared to monitor such an extensive and company-specific regime and expressed hope that the Trump administration would roll back the controls.

A US official, who declined to comment on possible actions by the Trump administration, emphasized that “time is of the essence.” “We are in a critical window now, particularly in relation to China. If we consider where our models are today compared to the People’s Republic of China models, estimates range from six to 18 months ahead, and every minute counts,” the official said.

One person familiar with the new regime said it is “nothing less than a political America First”, in reference to the mantra often used by Donald Trump. “The question is whether the new administration can maintain this or succumb to a ‘Petro-autocracies First’ policy.”

Ted Cruz, a Republican senator from Texas and the incoming chairman of the Senate Commerce Committee, said last week that the rules “will destroy American leadership in semiconductors.” He said he was prepared to trigger the Congressional Review Act, which can be used to reverse actions by federal agencies.

Cruz said the rules were “written in secret, without the participation of Congress or American companies.” Raimondo, however, said the administration “was careful and consulted with industry, civil society and experts on Capitol Hill.”

With information from the Financial Times*