China Evades U.S. Chip Controls – When Will We Respond?

A recent joint column for Foreign Policy makes the point that if the Biden “administration wants to succeed in holding a chokepoint over national security-sensitive supercomputing, [BIS] will have to get more creative.” That’s true, and time is ticking.

To put a finer point on why, Tim Fist of CNAS, Lennart Heim of Governance of AI, and Jordan Schneider of Rhodium Group cite reports of blacklisted Chinese entities exploiting weaknesses in U.S. policy and smuggling chips. For example:

“[B]lacklisted facial recognition company SenseTime has been using intermediaries to smuggle banned components from the United States, mirroring the approach taken by China’s top nuclear weapons lab, the state-run Chinese Academy of Engineering Physics. And despite being blacklisted for human rights abuses, state-backed artificial intelligence firm iFlyTek has been renting access to controlled NVIDIA chips via the cloud. … This tactic could soon become even easier: NVIDIA has recently signaled its intentions to expand its cloud supercomputing offerings to China.”

Smuggling chips isn’t the only problem. As China looks for runarounds to the U.S. policies intended to halt its advanced chip ambitions, it has ample runway to dominate in other chip segments. And it’s doing just that – something that should concern policymakers.

Asia Times writes that China is well positioned to make strides with third-generation chips, which “usually range between 90 and 350 nm, sizes that are not covered by the US sanctions.” In fact, Shenzhen-based Qianzhan Industry Research Institute “said in a research report that the trade war with the US actually made China become more focused on producing third-generation chips.”

Third-generation chips are used in power grids and electric vehicles, but Asia Times also notes they are found in “missiles, radars and electronic countermeasures designed to trick radars.” So while they don’t qualify as advanced chips, they are certainly consequential.

This is why we say Every Chip Matters and why the U.S. needs to take a broader view of its export control policies. We can’t focus exclusively on advanced chips. Our policies must cover legacy chips too. BIS is a key player and needs to get creative. Export Compliance Daily reports that BIS is working “day-in and day-out” on a final rule that makes tweaks to last year’s major export control rules. We eagerly await that rule, but the problem is bigger than BIS, so the solution – or rather solutions – must be too. A whole-of-government approach is required. Check out Every Chip Matters to see some of our proposed solutions.

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