The Biden administration is preparing to escalate its efforts to control the global supply of advanced AI chips, a strategic move aimed at maintaining the US’s technological edge over China, Axios reports.
The White House is reportedly drafting an executive order that would impose new restrictions on the sale of AI chips, not only to China but also to other countries in Southeast Asia and the Gulf.
The move underscores the growing importance of AI chips — the hardware that powers the latest advancements in artificial intelligence — in the geopolitical rivalry between the US and China. The initiative comes as part of a broader effort to close loopholes that have allowed Chinese firms to access advanced US-designed chips through backchannels.
AI chips are among the most valuable technological components in the world. They are essential for developing and running large-scale AI models and are key to the next generation of technological innovation. While US companies like Nvidia lead in the design of these chips, Taiwan’s TSMC dominates their manufacturing.
China’s domestic chipmaking capabilities, led by its largest manufacturer SMIC, remain years behind. The most advanced chips produced by SMIC are comparable to what TSMC made five years ago, highlighting the technological gap between China and the West. This gap gives the US a critical advantage, but it also drives China’s efforts to achieve semiconductor self-sufficiency.
The proposed executive order would expand existing controls on the export of advanced AI chips, which are already restricted for direct sales to China. The new rules aim to prevent indirect access by limiting sales to certain third-party countries where Chinese firms have been able to source restricted chips via alternative channels.
This strategy is intended to shut down “backdoor” access points. Chinese firms have reportedly resorted to tactics like purchasing chips from other countries or relying on black market suppliers. Nvidia’s AI chips, for instance, are known to be smuggled into China via informal trade routes, raising concerns about the effectiveness of current US export controls.
The US-China chip rivalry is often described as a “tech arms race,” as AI hardware plays a vital role in defense, cybersecurity, and economic competitiveness. The chips used to train and operate AI systems are designed primarily in the US, built using specialized chipmaking tools from the Netherlands, Japan, and the US, and manufactured at foundries in Taiwan and South Korea.
Beijing has pledged to close this technological gap, pouring hundreds of billions of dollars into research, development, and manufacturing. However, experts like Chris Miller, author of Chip War, believe the West holds a decisive edge. Advanced chipmaking equipment, such as the extreme ultraviolet (EUV) lithography machines made by Dutch firm ASML, is essential to produce next-generation semiconductors. With Western export controls on this equipment already in place, China faces significant hurdles in matching the technological prowess of companies like TSMC and Samsung.
“Everything depends on what type of equipment the West is going to be willing to sell to China,” says Miller. “If the restrictions are tight and get tighter, I have high confidence that the West retains its chipmaking lead.”
The pending executive order has sparked resistance from US tech firms and chipmakers, which are lobbying to soften the restrictions. Companies like Nvidia and Intel have developed special versions of their chips that comply with existing US regulations but can still be sold to China. However, tighter rules could jeopardize these sales.
China remains a critical market for US chipmakers, and firms are wary of being cut off from a lucrative revenue stream. Nvidia, for instance, has faced scrutiny from Chinese regulators, who recently launched an antitrust investigation into the company. This was seen as a retaliatory move after the US announced its latest round of export controls.
Meanwhile, China has moved to exert its own influence by limiting exports of key minerals used in chip production, further escalating tensions. While this tactic has the potential to disrupt global supply chains, it also poses risks for China’s economy, which remains dependent on semiconductor imports.
The Biden administration’s move to limit chip exports could deepen the divide between countries with unrestricted access to US technology and those with limited access. It could also accelerate the so-called “tech decoupling” between China and the West, further splintering global supply chains.
Countries like Japan, South Korea, and the Netherlands have already aligned with US efforts to curb China’s access to chipmaking technology. However, restricting sales to third-party countries in Southeast Asia and the Gulf could alienate allies or trading partners. These regions are increasingly seen as potential loopholes for the redistribution of restricted chips, prompting Washington to take preemptive action.
China has multiple levers it could pull to counter the US strategy. These include:
- Market Leverage: China’s vast consumer market for semiconductors provides it with bargaining power. Beijing has launched investigations into US chipmakers Nvidia and Intel, which could be seen as attempts to pressure these firms into supporting more lenient export rules.
- Supply of Critical Minerals: China controls a significant share of the global production of rare earth minerals, which are essential for chip production. Beijing has threatened to restrict exports of these minerals, a move that could have far-reaching consequences for global chip production.
- Geopolitical Pressure on Taiwan: The world’s most advanced chips are produced at Taiwan Semiconductor Manufacturing Company (TSMC), which accounts for 99% of global production of AI accelerator chips. Taiwan’s geopolitical position is a major point of leverage for China, which has vowed to bring the island under its control, potentially by military force.
The US decision to tighten chip export rules is part of a broader strategy that started under the Trump administration and has continued under Biden. Export controls and tech sanctions have become one of the primary tools for containing China’s technological rise.
However, some experts warn that the strategy could backfire. Cutting off China’s access to advanced chips could incentivize Beijing to accelerate its domestic semiconductor development. While China is unlikely to match Western technology in the short term, its long-term investment in self-sufficiency could lead to unforeseen advances in chipmaking.
Former Trump administration national security adviser Robert O’Brien criticized Biden’s executive order, warning that it could “cede the AI market to China” and “drive a wedge between the US and our partners.” The US faces a delicate balancing act — maintaining its technological edge without alienating allies or pushing China toward rapid innovation.
The Biden administration’s push to expand chip export controls comes at a time of heightened geopolitical uncertainty. All eyes are on Taiwan, home to the world’s most critical semiconductor foundry, TSMC. While TSMC is building new fabrication plants in Arizona as part of a Biden-led effort to onshore chip production, it remains heavily dependent on its facilities in Taiwan.
“All AI progress depends on TSMC production in Taiwan remaining online,” says Chris Miller.
This reliance underscores the fragility of the global semiconductor supply chain, which could be disrupted if tensions escalate between China and Taiwan.
