AI Chips Under Siege: How the U.S. Rallies Allies to Control AI Chip Exports
By Max Fang
(Feb 19, 2025)
“The growth in the importance of export controls as a national security tool mirrors the dynamic of militarily useful technology.” [1]
Alan F. Estevez, U.S. Under Secretary of Commerce for Industry and Security.
The United States Leading Global Controls on AI Chip Exports
Since the rise of global artificial intelligence (AI) competitions, an increasing number of countries have imposed export control measures and trade restrictions on the transshipment of semiconductors, which reflects their growing concerns over national and allied security. The evolving global semiconductor supply chain has become a focal point of geopolitical tensions, as governments aim to secure their technological competitiveness and protect critical infrastructure. These measures and restrictions on semiconductors are deeply intertwined with AI development, as advanced chips are the backbone of AI systems. Countries imposing these restrictions aim to limit the ability of competitors to develop cutting-edge AI capabilities that could shift the balance of power in economic and military domains.
The United States has initiated controls targeting AI chip export particularly since the second half of 2024. On December 2, 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) unveiled new rules aimed at curbing the Chinese ability to produce advanced semiconductors and technologies critical for military and intelligence applications. [2] This policy package includes controls on semiconductor manufacturing equipment, high-bandwidth memory (HBM), and software tools, alongside the addition of 140 entities to the Entity List to block their access to U.S. technology. [3] These measures reflect a proactive strategy to limit the Chinese military modernization, including its ability to develop advanced AI and computing technologies with applications in weapons systems, surveillance, and cyberwarfare. [4] Such regulatory action aligns with the Biden Administration’s broader national security objectives and its commitment to safeguarding critical technologies in collaboration with allies and partners. [5]
As such, the updated controls are part of a sustained effort under the Export Control Reform Act of 2018 and its implementing Export Administration Regulations (EAR), and are designed to address evolving threats posed by the Chinese Military-Civil Fusion strategy. [6] These new rules reinforce existing measures, such as the Foreign Direct Product (FDP) rules, to assert jurisdiction over foreign-produced goods tied to U.S. technology. [7] By targeting key aspects of the Chinese semiconductor ecosystem and its efforts to indigenize advanced technologies, the rules aim to slow China’s progress in critical areas in AI and semiconductor production, which pose risks to U.S. and allied national security. [8] This regulatory initiative also seeks to mitigate the Chinese use of these technologies for human rights abuses and repressive state policies. [9]
Efforts on Allied Coordination for AI Chip Export Controls
The Need for International Coordination
The success of the U.S. efforts to restrict advanced technology exports to China hinges on the coordination with key allies like the Netherlands, Japan, and South Korea. [10] Although allies are adopting parallel measures, such as Dutch and Japanese restrictions on lithography equipment exports, these actions have been described as “piecemeal.” [11] Significant differences between U.S. and allied export control systems create gaps in the envisioned restrictive framework. [12] For instance, while the U.S. employs an expansive “entity list” targeting specific companies, Japan and the Netherlands do not explicitly designate China as a country of concern and maintain narrower export control frameworks. [13]
Moreover, diverging commercial interests and strategic perspectives among semiconductor firms in Europe and Asia pose additional challenges. [14] Unlike the United States, most of its allies do not apply export controls extraterritorially, enabling firms to circumvent restrictions through overseas subsidiaries. [15] The EU’s progress toward unified export controls faces procedural hurdles, requiring consensus among all twenty-seven member states—a potentially lengthy process unlikely to meet the urgency of U.S. timelines. [16] These disparities highlight the critical need for harmonized policies to close loopholes and effectively restrict advanced technology transfers to China. [17]
U.S. Policy Efforts and Implicit Coordination with the Allies
The United States usually coordinate export controls with groups of like-minded states, with different styles of regimes for coordinating controls. [18] In 2023, the position of Regional Export Control Officer was established and stationed at the American Institute of Taiwan (AIT) for the first time, with Mr. Ariel Joshua Leinwand serving as its inaugural officeholder. [19] He represents the BIS on export control matters in Taiwan, Japan, and Korea, [20] where he helps coordinate and assist companies and industry partners in understanding and adhering to export control measures to ensure compliance with applicable laws and regulations governing international trade. [21]
Besides being entirely explicit, as they are with Taiwan, the United States also coordinates with its allies implicitly. For instance, on October 7, 2022, the Department of Commerce announced export controls on certain advanced semiconductors and advanced semiconductor manufacturing equipment (SME). [22] At that time, the United States with two allied countries, Japan, and the Netherlands, produced the majority of the world’s SME. [23] While neither Japan nor the Netherlands explicitly acknowledged collaboration with the United States, during January 2023, the United States confirmed that the other two nations had agreed to coordinate on controls over SME. [24] By March 2023, both Dutch and Japanese governments had announced new SME controls. [25]
U.S. Efforts of Coordination in the New Rule on AI Diffusion
On January 13, 2025, the U.S. government issued another Interim Final Rule on AI Diffusion, which strengthens U.S. AI leadership, streamlines licensing for chip exports, and enhances security standards. [26] The rule introduces six key mechanisms to responsibly diffuse U.S. AI technology while safeguarding national security. [27] The policy caps AI chip sales to non-allied nations, with stricter controls that tighten restrictions on countries of concern by limiting their access to advanced AI technologies to discourage their ability to train advanced AI systems and securing the weights of advanced closed-weight AI models. [28]
However, the rule permits unrestricted chip sales to eighteen key allies with robust technology. [29] Alongside the United States, these allies are Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Republic of Korea, Spain, Sweden, Taiwan, and the United Kingdom. [30]
This policy allows these other jurisdictions with strong technology protection measures and ecosystems aligned with U.S. national security and foreign policy interests to engage in seamless large-scale purchases. [31] It also simplifies licensing for smaller, low-risk orders, and establishes “Universal Verified End User” (UVEU) or “National Verified End User” statuses for trusted entities to access significant computational power. [32] By fostering international cooperation through government-to-government agreements and aligning global AI standards with U.S. values, the rule safeguards national security while enabling responsible AI diffusion. [33]
Building on prior regulations, this new rule advances both the diffusion of trusted technology and the protection of U.S. national security and allied interests. [34] AI is becoming a cornerstone of both national security and economic strength, necessitating decisive U.S. leadership among the allies to ensure responsible global AI use while preventing adversarial abuse of advanced AI technologies. [35] In the wrong hands, AI could exacerbate security risks by enabling weapons of mass destruction, offensive cyber operations, and human rights abuses such as mass surveillance. [36]
International Coordination for AI Chip Export Controls
Extensive discussions between U.S. officials, Japan, and the Netherlands have been underway to harmonize export control policies. [37] This alignment is aimed at shielding Japanese and Dutch firms from being negatively impacted by the U.S. foreign direct product rule. [38] New trade restrictions could significantly affect Japanese and Dutch semiconductor equipment manufacturers. [39] Tokyo Electron, for instance, with nearly half of its recent revenue coming from China, has faced potential economic impact of reduced access to the Chinese market. [40] Other companies, such as ASML, Applied Materials, Lam Research, and KLA, have also reported substantial revenue growth from China in recent quarters. [41] These firms risk substantial losses should export controls further restrict their ability to service or sell equipment to the Chinese chip industry. [42]
Japan
A Japanese official emphasized that the matter remains sensitive, with concerns over potential economic retaliation from China influencing the pace and scope of the agreement. [43] To address these concerns, the United States and Japan are strategizing to mitigate the potential fallout from Chinese countermeasures. [44] The two countries are nearing an agreement to impose restrictions on technology exports to China’s chip industry, aiming to curb Beijing’s advancements in semiconductor technology. [45]
The Netherlands
On January 15, 2025, the Dutch government announced it would expand export controls on advanced semiconductor equipment starting April 1, 2025, with ASML, a major chip equipment company, who expects no impact on its business operations. [46] Initially implemented in 2023 under U.S. efforts to limit exports to China, the controls have been progressively extended. [47]
The latest measures require export licenses for a limited set of technologies, including equipment for detecting defects in wafers and improving measurements after deposition and etching in the chipmaking process. [48] These updates reflect minor adjustments due to technical advancements, according to the Dutch trade ministry. [49] ASML affirmed that its guidance, issued in December following similar U.S. restrictions, remains unaffected. [50]
What Could be Next Beyond Export Controls?
Empirical research indicates that semiconductor export controls alone might be insufficient to contain AI developments of another nation. [51] The persistence of China’s access to export-controlled chips, stockpiling, and advances in domestic chip production signifies the limits of hardware-centric strategies. [52] Researchers suggest the United States adopt a proactive verification regime to address AI-related public safety risks by identifying harmful use cases, establishing benchmarks to measure the frontier of these risks, and comparing them to China’s AI capabilities. [53] This could involve the Department of Commerce, through the NIST AI Safety Institute, setting competitive, evolving benchmarks and testing constrained hardware to assess the limits of China’s domestic ecosystem. [54]
While China’s domestic production faces challenges, it is improving, with hardware expected to rival U.S. performance in time. [55] A key hurdle for China remains the development of software to fully exploit their hardware. [56] The United States must therefore monitor not only hardware capabilities but also advancements in software-hardware efficiency. [57] By tracking Chinese AI labs’ public outputs, such as papers and tools, the United States can gain insight into how export-controlled and domestic chips are utilized, as well as broader trends in Chinese AI development. [58] As such, continuous observation and analysis are necessary to inform future policy decisions and maintain an edge in AI innovation and security. [59]
In fact, Chinese AI startup DeepSeek has unveiled open-source large language models that claim to achieve exceptional performance using only a fraction of the computing power typically required by top U.S. models. [60] This alleged breakthrough challenges the prevailing U.S. notion that massive computing resources are essential for advanced AI, and suggests that restrictive export controls on high-performance chips may be inadvertently fostering innovative, resource-efficient AI training techniques in China. [61] This development raises challenges to the current approach, and the question of whether the effectiveness of the American-led export control efforts on AI chips will ultimately be undermined.
Tim Hill, Under Secretary of Commerce for Industry and Security Alan F. Estevez Keynote Remarks: BIS Update Conference 2024, Bureau of Indus. and Sec. (Mar. 28, 2024), https://www.bis.gov/speeches/under-secretary-commerce-industry-and-security-alan-f-estevez-keynote-remarks.
Commerce Strengthens Export Controls to Restrict China’s Capability to Produce Advanced Semiconductors for Military Applications, Bureau of Indus. & Sec. Off. of Cong. and Pub. Affs. (Dec. 2, 2024), https://www.bis.gov/press-release/commerce-strengthens-export-controls-restrict-chinas-capability-produce-advanced.
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Sujai Shivakumar, Charles Wessner, & Thomas Howell, Balancing the Ledger: Export Controls on U.S. Chip Technology to China, Ctr. for Strategic & Int’l Stud. (Feb. 21, 2024), https://www.csis.org/analysis/balancing-ledger-export-controls-us-chip-technology-china.
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Christopher A. Casey, Cong. Rsch. Serv., R47684, Export Controls—International Coordination: Issues for Congress, at *Summary (2023), https://crsreports.congress.gov/product/pdf/R/R47684.
Ariel Joshua Leinwand Assumes Regional Export Control Officer (ECO) Stationed at AIT, Am. Inst. in Taiwan (Oct. 31, 2024), https://www.ait.org.tw/ariel-joshua-leinwand-assumes-regional-export-control-officer-eco-stationed-at-ait/.
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日經：美國為貫徹對中國限制出口 區域管制官派駐AIT, 世界新聞網 (Oct. 25, 2024 at 1:49 PM ET), https://www.worldjournal.com/wj/story/121475/8317135. See also 美國出口管制工作坊, SME/ACS Correction/Clarification Rule, 經濟部國際貿易署經貿資訊網 (May 10, 2024), https://www.trade.gov.tw/Files/PageFile/783874/783874mi5wl20240516110859.pdf.
Casey, supra note 10, at 25.
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FACT SHEET: Ensuring U.S. Security and Economic Strength in the Age of Artificial Intelligence, The White House (Jan. 13, 2025), https://www.whitehouse.gov/briefing-room/statements-releases/2025/01/13/fact-sheet-ensuring-u-s-security-and-economic-strength-in-the-age-of-artificial-intelligence/. See also, e.g., Karen Freifeld, Exclusive: New US Rule on Foreign Chip Equipment Exports to China to Exempt Some Allies, Reuters (July 31, 2024 at 1:02 PM EDT), https://www.reuters.com/technology/new-us-rule-foreign-chip-equipment-exports-china-exempt-some-allies-sources-say-2024-07-31/.
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Id. See Supplement No. 5 to 15 C.F.R. Part 740.
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[News] US and Japan on the Verge of Deal to Restrict Chip Technology Exports to China, TrendForce (Sept. 18, 2024), https://www.trendforce.com/news/2024/09/18/news-us-and-japan-on-the-verge-of-deal-to-restrict-chip-technology-exports-to-china/.
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Demetri Sevastopulo & Leo Lewis, US and Japan near deal to curb chip technology exports to China, Financial Times (Sept. 17, 2024), https://www.ft.com/content/3fa44901-33e4-4ab4-9f7b-efe1575a6553.
Reuters, Netherlands to Expand Export Controls on Semiconductor Equipment, Yahoo!Finance (Jan. 15, 2025 at 12:07 PM EST), https://finance.yahoo.com/news/netherlands-expand-export-controls-semiconductor-170755714.html.
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Ritwik Gupta, Leah Walker, & Andrew W. Reddie, Whack-a-Chip: The Futility of Hardware-Centric Export Controls, AI Frontiers Initiative 1, 4, https://arxiv.org/pdf/2411.14425.
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John Villasenor, DeepSeek Shows the Limits of US Export Controls on AI Chips, Brookings (Jan. 29, 2025), https://www.brookings.edu/articles/deepseek-shows-the-limits-of-us-export-controls-on-ai-chips/.
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