The US Department of Commerce on Sunday moved to close a potential loophole that might have enabled companies to export the world’s most advanced chips — such as Nvidia Corp’s most sophisticated Blackwell processors — to subsidiaries of Chinese companies outside China.The unexpected guidance suggests that the US’ best artificial intelligence (AI) chips might have been making their way to the subsidiaries of Chinese AI firms based in places such as Malaysia, despite broader US efforts to starve Chinese firms of semiconductors needed to develop critical AI capabilities.The new guidance was posted on the commerce department’s Web site after a paper about the loophole circulated in Washington, people familiar with the matter said.
An Nvidia GB10 Grace Blackwell chip is displayed at Nvidia Corp’s GTC conference in San Jose, California, on March 19 last year.
The paper, a copy of which was seen by Reuters, says that “the floodgates have quietly opened.”Dated on Friday, it does not list any author.
It is unclear how many of the chips have been exported in the year that US President Donald Trump’s administration left the door open. One chip industry source with deep supply-chain knowledge estimated it was in the hundreds of thousands.In the unusual weekend guidance, the department’s Bureau of Industry and Security (BIS) said it would enforce license requirements for advanced chips to entities headquartered in China when the entities were located outside China.“BIS issued guidance clarifying export license requirements that have been in place since 2023,” a bureau spokesperson said. “BIS will continue to enforce export controls rigorously to safeguard critical American technology.”The new guidance does not change anything for Nvidia, a company official said, adding that it could not ship the chips because the commerce department had clearly imposed a license requirement on Nvidia in a letter.Advanced Micro Devices Inc, another big producer of sought-after AI chips, did not immediately respond to a request for comment.The commerce department created the opening when it announced in May last year that it would not be enforcing the AI Diffusion rule issued in the last days of former US president Joe Biden’s administration. The rule had licensing requirements governing global access to AI chips.Former US Department of State official Chris McGuire, an expert on technology and national security, on Sunday wrote on social media that the loophole allowed the overseas subsidiaries of Chinese companies to buy Nvidia Blackwell chips without a license.“This is a HUGE problem,” he said. “Chinese companies have been buying these chips, very likely at scale.”The guidance closes the loophole, but leaves another open, McGuire said.That loophole drops the requirement that Taiwan Semiconductor Manufacturing Co (台積電) and other foundries do extra due diligence to ensure that the high-end AI chips they are making are not for Chinese front companies, he said.That issue was not fixed by the guidance, he added.In addition, the new guidance does not require data centers to stop using the chips or cut off servicing of the advanced computing items such as servers.
