The United States restricts Nvidia from selling artificial intelligence chips in the Chinese market to prevent China from acquiring advanced semiconductor technology. This is part of U.S. export controls designed to prevent China from acquiring cutting-edge technology for military purposes. Under the new rules, Nvidia's A800 and H800 chips will be subject to tighter restrictions, requiring the company to notify the U.S. government before selling chips that fall below regulatory thresholds. These chips are considered to be the top chips that power artificial intelligence models. However, even slightly inferior chips could pose a national security risk because they could be used in artificial intelligence and supercomputing.
The new regulations remove communication speed limits and focus on computing performance. This will cause Nvidia's A800 and H800 chips to stop being sold in the Chinese market. In addition, Intel's artificial intelligence chip Gaudi2 will also be affected. Nvidia says it will comply with all applicable regulations and strive to provide products that support thousands of applications across industries. They do not expect these restrictions to have a material impact on financial results in the short term.
The United States has also added a new measure to restrict chips that exceed a certain performance density level. This means that there cannot be too much computing power packed into a certain number of chips. The rule is intended to prevent companies from trying to bypass restrictions on entire chips by using "chiplet" technology. The government will review the company's notification within 25 days to determine whether a license is needed to sell the chips to China.
The U.S. government wants to monitor activity in gray areas but declined to disclose the specific chip parameters affected. The government will require companies to obtain licenses to sell chips to more than 40 countries to prevent Chinese companies from using these licenses to circumvent U.S. controls. In addition, the Biden administration has imposed licensing requirements for chip manufacturing equipment in 21 countries outside China and expanded the list of equipment prohibited from entering these countries. Some Chinese companies and their subsidiaries were added to the trade restrictions list, requiring companies to obtain U.S. government permission before shipping to these companies.
Overall, the United States is restricting exports of artificial intelligence chips to China to protect national security and prevent China from acquiring advanced semiconductor technology. While concessions have been made in some key areas to allow the sale of advanced commercial chips to Chinese companies, the most advanced consumer chips and some lower-tier models remain restricted. In addition, the United States has also tightened controls on chip manufacturing equipment and imposed trade restrictions on some Chinese companies.