Biden Urged to Withdraw 'Underinformed' New AI Chip Export Control Rules

Both the Information Technology and Innovation Foundation and the Semiconductor Industry Association urged the Biden administration to reverse course. ITIF said it should “immediately” rethink the restrictions, which are expected to be published as an interim final rule before Biden leaves office (see 2501080002). SIA asked the government to instead issue the restrictions as a proposed rule -- which would allow for industry feedback and possible revisions without a set effective date -- or allow the new Trump administration to decide how to move forward.

“We respectfully caution against making such a swift and significant shift in policy during this transitional period, and without meaningful consultation with industry,” SIA said. It added that its members are “deeply concerned by the unprecedented scope and complexity of this potential regulation, which was developed without industry input and could significantly undercut U.S. leadership and competitiveness in semiconductor technology and advanced AI systems.”

ITIF called the upcoming rule “overdesigned, yet underinformed,” and said it’s “clear” the Biden administration “is trying to shoehorn these rules under the wire in the dying days of its term and hamstring the following administration from making its own assessment of the central challenge and how to respond to it.”

A BIS and Commerce Department spokesperson didn’t respond to a request for comment. The statements from ITIF and SIA came just after major cloud services provider Oracle also criticized the upcoming restrictions, calling them some of the “most destructive to ever hit the U.S. technology industry” (see 2501060015).

ITIF said it’s especially concerned about the rule’s new mandatory global export license requirements for certain AI technology and graphics processing units (GPUs), which would set country-specific caps on U.S. exports of those technologies. Although 20 close U.S. allies would be exempted from the caps, ITIF said some of America’s “most important allies” and key trading partners wouldn’t be exempted, including Israel, Singapore, Mexico, Brazil, India, Indonesia, Malaysia, Saudi Arabia and the United Arab Emirates. Those countries would be allowed to receive certain GPUs as part of a new License Exception Low Processing Performance (LPP), and a new Universal Validated End User regime would allow certain U.S. companies to send AI systems to their own branches operating in foreign countries.

The think tank said this approach looks to limit or control “all global sales of U.S. advanced chips through aggregate country caps,” which “would introduce significant economic competitiveness, security, and even foreign policy concerns.” Placing caps on U.S. exports of AI GPUs will limit market opportunities for American firms while giving foreign AI chip suppliers, including those in China, an “open door” to “swoop in and take market share.”

“By artificially restricting AI chip exports to the vast majority of the world, the U.S. government essentially forces open the door for foreign competition across the globe, redirecting revenue that could be flowing to U.S. chipmakers to invest in next-generation chips with competitors abroad,” ITIF said.

ITIF also said the restrictions would put in place “considerable -- likely intractable -- compliance challenges.” It would be “extraordinarily difficult (if not well-nigh impossible)” for companies to know whether an export would bring a certain country over the cap set by BIS, the think tank said, unless a U.S. government agency is prepared to track and review all sales and aggregated sales information across all of industry, both in the U.S. and companies operating abroad.

“Even the existing AI chip export license process, which applies to only a few countries (and China already), is unpredictable, expensive, and time consuming; so expanding that to a global process would be highly impracticable, and that would hold true for any country-level cap, regardless of how high,” ITIF said.

The think tank also questioned how the government will pick “winners and losers” in determining country-specific caps and potentially picking which companies would get to fulfill those caps. If, for example, the U.S. government assigned a country an annual cap of 25,000 GPUs and multiple U.S. firms submitted license applications to ship 10,000 GPUs to that country, “how would the U.S. government arbitrate that request?” ITIF asked.

And if the U.S. government “wildly missed in its estimate,” including by undershooting a country cap for a friendly trading partner like Singapore, ITIF said, Singapore’s remaining market demand would be filled by a foreign competitor “who would then have a foot in the door for future sales.”

U.S. export control policy has long been aimed at placing restrictions on specific end users and end uses, but the BIS rule “turns decades of U.S. export control policy directly on its head, moving it from a tailored, narrow approach to imposing a blanket license regime on all countries (even if a subset is exempted),” ITIF added. “This represents a quite significant expansion of the U.S. export control regime, both in conceptualization and operation, and as such points to how overwrought these proposed regulations truly are.”

The rule “represents a flawed policy that should be immediately withdrawn and replaced with a better approach in the next administration based upon more-extensive stakeholder input and consultation," ITIF said.