The Joe Biden administration has announced its intention to halt shipments of artificial intelligence (AI) chips, specifically those designed by Nvidia and other companies, to China.
Gartner says AI semiconductor revenue will experience double-digit growth through the forecast period, increasing 25.6 percent in 2024 to $67.1 billion. By 2027, AI chips revenue is expected to be more than double the size of the market in 2023, reaching $119.4 billion, the Gartner report said.
A latest IDC report says enterprises will invest nearly $16 billion on Generative AI solutions in 2023. This spending, which includes GenAI software as well as related infrastructure hardware and IT / business services, is expected to reach $143 billion in 2027 with a compound annual growth rate (CAGR) of 73.3 percent over the 2023-2027 forecast period.
The regulations are a refinement of measures released in October 2022 and are set to be updated at least annually, according to Commerce Department Secretary Gina Raimondo. The primary objective is to limit China’s access to advanced semiconductors critical for military applications, particularly in artificial intelligence and sophisticated computers, without intending to harm China economically.
Nvidia and AMD Affected
Leading AI chip designer, Nvidia, confirmed compliance with the new regulations, expecting no immediate significant financial impact, Reuters news report said.
Nvidia’s business had surged following the imposition of last year’s rules, as their China-only chips remained superior to alternatives. However, the new regulations will affect Nvidia’s A800 and H800 chips due to changes in chip parameters. AMD, another impacted company, plans a similar strategic approach.
The rules, while exempting most consumer chips used in laptops, smartphones, and gaming, will subject some to licensing and notification requirements. The emphasis is on limiting China’s access to advanced semiconductors crucial for artificial intelligence advancements and not targeting U.S. companies extensively.
Stricter Rules and Expanded Licensing
The previous rules utilized a two-pronged test to measure a chip’s computing performance and its ability to communicate with other chips, crucial in AI supercomputers. The new rules focus on computing performance, eliminating communication speed limits. Additionally, a measure to restrict chips exceeding a certain level of “performance density” has been introduced to prevent workarounds using chiplets.
The new regulations also expand licensing requirements for exports of advanced chips to over 40 additional countries, aiming to curb diversion risks to China. Chip exports to units of companies headquartered in China, Macau, and other arms embargoed countries will be barred. This expansion of restrictions is part of efforts to prevent illegal smuggling of chips into China and remote access by Chinese parent companies.