US moves to block Nvidia AI chip access through overseas Chinese subsidiaries
Synopsis
New US guidance aims to prevent Chinese companies from obtaining advanced AI chips through overseas subsidiaries, strengthening Washington’s semiconductor export controls.
The US Department of Commerce has issued new guidance aimed at preventing Chinese companies from obtaining advanced artificial intelligence chips through subsidiaries located outside China. The move targets a potential loophole that may have allowed some of the world's most advanced AI processors, including Nvidia's Blackwell chips, to reach Chinese-linked entities despite existing US export restrictions.
Key highlights
- US issues guidance targeting AI chip exports to overseas subsidiaries of Chinese firms
- Move aims to close a loophole involving advanced Nvidia Blackwell processors
- Officials say export license requirements have been in place since 2023
- Experts warn Chinese companies may have acquired chips through foreign entities
- New guidance does not affect existing Nvidia licensing requirements
What happened?
The Commerce Department published new guidance on Sunday through its Bureau of Industry and Security (BIS), clarifying that export license requirements apply to Chinese-headquartered entities even when those entities operate outside mainland China.
The guidance followed the circulation of a paper in Washington that raised concerns about a gap in US export controls.
According to people familiar with the matter, the paper argued that overseas subsidiaries of Chinese companies may have been able to acquire advanced AI chips despite broader US efforts to limit China's access to cutting-edge semiconductor technology.
One industry source familiar with global semiconductor supply chains estimated that hundreds of thousands of advanced chips may have been exported through this channel over the past year.
Why this matters
The United States has imposed a series of restrictions on advanced semiconductor exports to limit China's ability to develop sophisticated artificial intelligence systems.
The newly issued guidance suggests policymakers were concerned that Chinese companies may have been accessing advanced AI chips through subsidiaries located in countries outside China, including locations such as Malaysia.
If such purchases occurred, they could have weakened the effectiveness of US export controls designed to restrict access to high-performance computing technology.
Official statements
The Bureau of Industry and Security said the guidance reinforces existing export rules rather than creating new restrictions.
“BIS issued guidance clarifying export license requirements that have been in place since 2023.”
The agency added: “BIS will continue to enforce export controls rigorously to safeguard critical American technology.”
A Nvidia official said the guidance does not change the company's current obligations because the Commerce Department had already imposed license requirements on shipments of advanced chips.
AMD did not immediately respond to requests for comment.
Experts raise concerns about export loopholes
Former US State Department official Chris McGuire said the previous situation allowed overseas subsidiaries of Chinese companies to obtain advanced Nvidia Blackwell chips without a license.
“This is a HUGE problem.”
McGuire said Chinese companies may have been purchasing the chips at major scale and described the new guidance as an important step toward closing the gap.
However, he argued that another issue remains unresolved.
According to McGuire, the guidance does not restore additional due diligence requirements for manufacturers such as Taiwan Semiconductor Manufacturing Co. (TSMC) to verify that advanced chips are not being supplied to Chinese front companies.
A spokesperson for TSMC declined to comment.
Background & Context
The issue emerged after the Trump administration announced in May 2025 that it would not enforce the AI Diffusion Rule introduced during the final days of the Biden administration.
That rule established licensing requirements governing global access to advanced AI chips.
Critics argued that the decision created an opening through which overseas subsidiaries of Chinese firms could potentially purchase high-end processors without the same restrictions applied to entities located directly in China.
The latest Commerce Department guidance seeks to clarify how existing export controls should be applied in such cases.
What happens next?
US authorities are expected to continue monitoring exports of advanced AI chips and enforcing licensing requirements involving Chinese-linked entities.
Industry observers will also be watching whether Washington introduces additional measures addressing supply-chain oversight and semiconductor manufacturing due diligence.
The guidance does not currently require data centres to stop using affected chips or halt servicing of systems already containing advanced AI processors.
FAQs
Q1: What are Nvidia Blackwell chips?
Blackwell processors are Nvidia's latest generation of advanced AI chips designed for artificial intelligence training and high-performance computing workloads.
Q2: What loophole is the US trying to close?
US officials are targeting a potential gap that may have allowed overseas subsidiaries of Chinese companies to acquire advanced AI chips without obtaining export licenses.
Q3: Does the new guidance create new export restrictions?
The Commerce Department said the guidance clarifies export license requirements that have existed since 2023 rather than introducing entirely new rules.
Q4: Does the guidance change Nvidia's current obligations?
No. Nvidia said existing Commerce Department licensing requirements already govern shipments of its advanced AI chips.
Q5: Does the guidance affect existing data centres?
No. The guidance does not require data centres to stop using advanced AI chips already in operation or discontinue servicing existing systems.
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I write about markets, money, and the macro forces that move them. Passionate about turning complex economic trends into sharp, easy-to-understand stories. Off the clock, it’s hip hop, rock, reggae -- and a mix of cricket and basketball.
