The Trump administration is looking to tighten restrictions on exports of advanced AI processors from the country as well as persuade allies in Japan and the Netherlands to make Tokyo Electron and ASML stop servicing their tools installed in China, reports Bloomberg. While the move will certainly make the lives of Chinese chipmakers harder, it will affect U.S. allies and not in a good way.
Fewer AI processors for everyone
When President Joe Biden was prepping to leave the White House in early January, his administration proposed its final set of export restrictions on advanced AI processors. Under the new guidelines, called the AI Diffusion Rule, only entities from the U.S. and 18 allies (Tier 1 countries) can obtain powerful AI processors — such as Nvidia's H100 GPUs — without limits. Other foreign entities (Tier 2 countries) will have restricted access to AI GPUs unless they secure validated end user (VEU) status. Countries under arms embargoes (Tier 3 countries), including China, Russia, and Macau, will be almost entirely prohibited from importing AI GPUs. Trump's government is reviewing this framework to streamline and reinforce its efficiency, according to the report.
Under the Biden's AI Diffusion Rule, companies from Tier 2 countries can get up to 1,700 Nvidia H100 GPUs (or equivalent) without any export license. These orders will also do not count toward the national AI processor limit of around 50,000 units. One proposed change is reducing the number of AI chips that can be exported without government approval (i.e., from 1,700 to a lower number). Some people in the government want to lower this threshold and increase oversight over AI processors exports.
The move will not be exactly welcome by the industry as tech industry leaders were pushing back against AI Diffusion Rule restrictions. Nvidia's CEO, Jensen Huang, has expressed optimism that the Trump administration would adopt a more flexible approach. Companies worry that stricter limits on chip exports could harm business interests while encouraging Chinese firms to develop domestic alternatives faster.
Another hit on Chinese semiconductor sector
Officials from the U.S. government have held meetings with representatives from Japan and the Netherlands to push for restrictions on maintenance services for semiconductor manufacturing equipment in China. The goal is to prevent companies like Tokyo Electron and ASML from servicing chipmaking tools in China, mirroring U.S. restrictions on domestic firms such as Applied Materials, KLA, and Lam Research.
Without regular maintenance, tools from ASML and Tokyo Electron can quickly become obsolete. If allies agree to U.S. demands, Chinese semiconductor production could face serious disruptions. However, ASML and TEL will also lose tens of millions of dollars that Chinese companies pay for their services.
In addition, there are discussions underway in Washington about imposing sanctions against specific Chinese semiconductor firms. One proposal targets ChangXin Memory Technologies (CXMT), a company that was considered for restrictions by the previous government, but was spared due to Japan's opposition. Trump officials are now revisiting the possibility of blocking it from acquiring American chipmaking tools completely by adding it to the U.S. Department of Commerce Bureau of Industry and Security's (BIS) Entity List.
The administration is also looking to impose tighter restrictions on Semiconductor Manufacturing International Corp. (SMIC), which makes chips for blacklisted Huawei. Biden had restricted shipments to certain SMIC facilities while allowing case-by-case reviews for others. However, this approach allows SMIC to obtain U.S. tools that could be transferred from one facility to another to support production of processors on advanced nodes.
Despite these plans, it may take several months before any new regulations take effect. Trump's administration is still in the process of staffing key federal agencies, and allies may not immediately support these initiatives. To that end, Biden's AI Diffusion Rule will come into effect on May, whereas ASML and TEL will continue to service their tools at Chinese fabs.
