[HONG KONG] The Trump administration plans to overhaul regulations on the export of semiconductors used in artificial intelligence (AI), tossing out a Biden-era approach that had drawn strenuous objections from US allies and companies including Nvidia and Oracle.
Under the move announced on Tuesday (May 13) by the Commerce Department, the US is rescinding the so-called AI diffusion rule launched by president Joe Biden that created three broad tiers of access for countries seeking AI chips and would have taken effect May 15. Instead, the Trump administration is drafting its own approach and could shift towards negotiating individual deals with countries, according to sources familiar with the matter.
The agency said it’s also issuing guidance to make clear that using Huawei Technologies’s Ascend AI chips “anywhere in the world violates US export controls”. And it plans to warn the public about the potential consequences of allowing US AI chips to be used in developing Chinese AI models.
Biden’s regulations “would have undermined US diplomatic relations with dozens of countries by downgrading them to second-tier status”, the Commerce Department said on Tuesday (May 13), adding that it will publish a notice that formalises the rescission of the rule and issue a replacement “in the future”.
Changes to the AI diffusion framework, which Biden released during his final week in office, are emerging during US President Donald Trump’s visit to the Middle East, where a number of nations have bristled at the latest restrictions. Trump’s replacement regulations, which sources familiar with the matter said will aim to strengthen controls on chips abroad, are still taking shape.
The Commerce Department said that whatever comes of it will be “a bold, inclusive strategy to American AI technology with trusted foreign countries around the world, while keeping the technology out of the hands of our adversaries”.
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The policy debate, which remains ongoing, centres on the question of how to regulate semiconductor shipments to places outside of China. Both Trump and Biden officials have sought to crack down on Beijing’s semiconductor ambitions, over concerns that advanced chip and AI technology could lend China a military edge.
Scrapping the AI diffusion framework will not change the measures targeting China, which Trump recently toughened. Rather, it would provide fresh opportunities for other countries to negotiate their own chip access, as governments around the world seek to develop domestic AI capabilities. Those deals could be influenced by investment promises or broader trade and diplomatic considerations.
The US first imposed sweeping restrictions on advanced chip sales to China in 2022, and has ratcheted up those measures several times to encompass a broader swath of semiconductors and a growing list of countries. That included a 2023 expansion to more than 40 nations, including much of the Gulf and parts of South-east Asia, where Biden officials suspected China could access banned technology via intermediaries.
The AI diffusion rule, unveiled during Biden’s final week in office, expanded those licensing requirements to most of the world.
The framework sought to further crack down on China’s ability to access US chips via third countries, and to bring more nations into the US orbit by setting security requirements to access best-in-class American technology.
The rule included caps on total shipments to places such as the UAE and Saudi Arabia, which already had to obtain US government approval for advanced chip imports under the 2023 regulations. It also imposed chip controls for the first time on dozens of countries, including India, Malaysia and Poland.
Trump officials intend to impose curbs on countries that have diverted chips to China, including Malaysia and Thailand, one of the sources said. In the meantime, the Commerce Department will continue to strictly enforce existing chip export rules, according to the sources familiar with the matter, who asked not to be identified because the plans are not yet public.
Nvidia, the leading maker of chips for training AI models, has objected to the growing number of US restrictions. The company has consistently derided the AI diffusion rule and pushed for its wholesale repeal, arguing that restrictions on third countries will only push them closer to China.
Chief executive officer Jensen Huang recently said that US companies should be able to sell into China, which he predicts will become a US$50 billion market for AI chips in the next couple of years.
Still, the Trump administration has stepped up restrictions targeting Beijing’s tech ambitions. It already banned Nvidia from selling its H20 chip in China, a move that cost the company US$5.5 billion in writedowns.
“We welcome the Administration’s leadership and new direction on AI policy,” the company has said. “With the AI Diffusion Rule revoked, America will have a once-in-a-generation opportunity to lead the next industrial revolution and create high-paying US jobs, build new US-supplied infrastructure, and alleviate the trade deficit.”
Much will hinge on the terms of bilateral chip accords that Trump officials could negotiate over the coming months. Reaching such agreements could prove a monumental task, and could result in dozens of separate policies by which companies must abide.
In the immediate term, though, the changes could be a boon to companies such as Oracle, which is planning a massive data centre expansion in Malaysia that was set to blow past AI diffusion rule limits.
The Trump administration’s move is also welcome news for countries that were covered by earlier rounds of US restrictions, such as the UAE and Saudi Arabia, but see fresh opportunities to negotiate better terms with the new team in Washington. BLOOMBERG
