The U.S. government has expanded its advanced artificial intelligence (AI) semiconductor export controls to include overseas subsidiaries of Chinese companies. Until now, the rules applied only to firms based inside China, fueling speculation that cutting-edge chips such as Nvidia's Blackwell may have flowed into China through the foreign subsidiaries of Chinese firms. Washington moved to close this loophole only after more than a year.
According to Reuters, the U.S. Department of Commerce announced on its website on Sunday that licensing rules for advanced AI chips will apply not only to companies located in China but also to overseas subsidiaries of Chinese firms. Foreign media noted it was highly unusual for the U.S. government to release such a rule on a Sunday.
The U.S. government currently bars exports to China of advanced AI chips made by American firms, including Nvidia's Rubin and Blackwell and AMD's MI350x. However, subsidiaries of Chinese companies based in countries such as Malaysia had not been subject to these restrictions — a gap that has now been closed. The previous Joe Biden administration, in a bid to block the inflow of advanced AI chips into China via third countries, announced the regulation just before leaving office and said it would take effect in May this year. The Donald Trump administration, however, halted the rule at the last minute. Reuters said this created a one-year loophole.
"It is unclear how many chips were exported during the period the Trump administration left the door open," Reuters reported, citing a semiconductor industry source familiar with the supply chain who estimated the figure at hundreds of thousands. Chris McGuire, a former State Department official, criticized the situation on social media, calling it "a huge problem." He said the loophole allowed overseas subsidiaries of Chinese firms to obtain Nvidia's Blackwell without a license, adding, "They probably bought them in bulk."
In December, the Trump administration conditionally approved exports to China of Nvidia's H200 chip, which uses an architecture one generation behind Blackwell. Recently, about 10 Chinese companies including Alibaba received U.S. government approval to purchase H200 chips, but deliveries have not yet been made as Chinese regulatory approval is still pending. Market watchers anticipate the U.S. government may roll out additional measures targeting the rerouting of advanced AI chips through third countries.
