Biden Looks to Close China’s Underground Loophole for Receiving American Chips

President Joe Biden is reportedly considering a new measure that hopes to block the small number of American chips that still make their way to China, in spite of an export ban, according to Reuters Friday. A United States rule restricting the export of advanced chips to China was revised this week, and yesterday went into final review.

Last year, the Biden administration issued sweeping export controls to cut off China from chips capable of building large language models, in an effort to curb Beijing’s technical and military advances. However, high-end NVIDIA chips can still be purchased at the infamous Huaqiangbei electronics area in Shenzen, China according to the report.

Chinese vendors mainly acquire the chips in two ways: importing through nearby Asian countries such as India, Taiwan and Singapore, or purchasing the overflow of chips sold to US firms. The new rule from Biden’s administration hopes to block these avenues, but it is unclear how.

The amount of chips sold by these local vendors is likely not enough to produce sophisticated large language models from scratch, but they can improve Chinese data centers and run complex machine-learning tasks.

Meanwhile, the United States extended Taiwan Semiconductor Manufacturing Company’s waiver for supplying US chip-making equipment to its Chinese factories, Taiwan’s Economic Affairs Minister Wang Mei-hua announced Friday. The decisions are undoubtedly tied, as Biden’s administration walks the geopolitical tightrope of blocking China’s access to chips and appeasing the world’s most advanced semiconductor company. TSMC continues to build one of the largest semiconductor factories in the world in Arizona, which hopes to ramp up US chip production.

It is reported an announcement of the new chips blockade can be expected as soon as today, or at least before Biden’s meeting in November with President Xi, sources told The Trade Practitioner.