The semiconductor export licensing system is a new card played by the Donald Trump administration after the Supreme Court's ruling that reciprocal tariffs are illegal reduced its means to pressure foreign investment into the United States. With tariff strategy derailed ahead of this year's midterm elections, the administration is now weaponizing artificial intelligence chips dominated by America's two major companies, Nvidia and AMD. Given that semiconductors have proven their power in the US-China trade war, observers predict the US will strengthen AI chip controls to pressure allied nations including South Korea.
The US Department of Commerce announced via social media on the 5th (local time): "We are committed to facilitating safe exports of the US technology stack. We have successfully promoted exports through the historic Middle East agreements, and internal government discussions are underway to formalize this approach."
US media reported that the Trump administration is preparing new regulations that would permit semiconductor exports only when conditions such as US data center investment are met. The Commerce Department confirmed this content while citing contracts with Saudi Arabia and the United Arab Emirates as examples for other countries to follow. During Saudi Crown Prince Mohammed bin Salman's US visit last November, President Trump authorized exports of 35,000 Nvidia latest graphics processing units each to Saudi Arabia and the UAE.
Currently, the US imposes 10% tariffs worldwide based on Section 122 of the Trade Act, but this expires after 150 days, and some states have filed lawsuits claiming tariffs under Section 122 are also illegal. Additionally, while using semiconductor tariffs as leverage for investment pressure under Section 232 of the Trade Expansion Act, analysts say tariffs provide little pressure when memory semiconductors have become a seller's market.
This measure has set off alarms in various countries. If the Trump administration delays sales approvals to gain advantage in trade negotiations, AI projects in semiconductor-importing nations would face disruptions. The UAE case is representative. The UAE received approval to import Nvidia chips last year on the condition of investing in the US an amount equal to its domestic AI investment, but several months elapsed from export contract to actual approval.
Competing nations including Europe view the Trump administration's semiconductor controls unfavorably, but have no viable alternatives without securing Nvidia or AMD chips. The alternative would be Chinese products such as Huawei, but even Chinese companies use Nvidia chips because Huawei chip performance is still insufficient. Using Huawei products could also violate US trade sanctions, effectively removing Huawei from consideration. Axios assessed that "this means President Trump views AI semiconductor exports as a bargaining chip and leverage in bilateral negotiations with other countries."
South Korea will also find it difficult to avoid the shock. Under the 'AI Diffusion Rule' export regulation conceived by the previous Joe Biden administration, South Korea was classified in the 'Tier 1' group as an ally that could import cutting-edge GPUs with virtually no restrictions. However, if this policy is implemented, South Korea would need to invest in the US or undergo rigorous screening. The AI Diffusion Rule divided the world into Tier 1 countries with virtually no regulations, Tier 2 countries required to comply with strict security regulations, and Tier 3 countries banned from receiving cutting-edge GPU exports. The Trump administration abolished the system, arguing that Tier 2 countries could boost China's AI industry by using Chinese chips.
South Korea's large semiconductor market means significant AI chip demand, so if new regulations take effect, it may have to accept burdensome conditions such as US data center investment. Unlike Biden administration rules, Trump administration regulations are structured so that controls strengthen as export volumes increase. Particularly, if AI development is delayed due to Nvidia and AMD chip controls, memory chip demand would also decrease, potentially harming Samsung Electronics and SK Hynix.
Critics point out such regulations could boomerang on US semiconductor companies. The Financial Times reported that day, citing sources, that Nvidia has shifted production capacity at Taiwan foundry TSMC from H200 to the latest 'Vera Rubin' production. In its recent fiscal year 2026 business report, Nvidia expressed concern that export regulations could reduce sales not only in China but worldwide.
Nvidia reportedly received orders for 1 million H200 units from Chinese companies. President Trump allowed resumption of Nvidia H200 chip exports last December after the sale of TikTok's US operations was finalized. However, approval was delayed due to Commerce Department's stringent conditions, and the Chinese government also instructed domestic companies to purchase H200s only when necessary, significantly hurting Nvidia. The FT analyzed that Nvidia decided to reduce uncertainty and focus on next-generation chip production with guaranteed demand rather than clinging to H200 sales.
