Without Changes, Biden’s AI Export Control Rule Will Be ‘Gift’ to China, Microsoft Says
Microsoft this week urged the Trump administration to rethink portions of a Biden-era rule that placed global export controls on certain shipments of advanced artificial intelligence chips, saying the rule will have unintended negative consequences on the American technology industry.
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The AI diffusion rule, which is scheduled to take effect in May, groups the world into three categories of countries, each of which will face different export license requirements for certain advanced chips (see 2501130026 and 2502110074). Microsoft President Brad Smith said the rule leaves out too many important U.S. allies and partners from Tier 1, the group of nations that will face the fewest export restrictions, and instead places them in the more restrictive Tier 2.
This will impose “quantitative limits on the ability of American tech companies to build and expand AI datacenters in their countries,” Smith said, specifically naming Switzerland, Poland, Greece, Singapore, India, Indonesia, Israel, the United Arab Emirates and Saudi Arabia. “These are countries where we and many other American companies have significant datacenter operations,” he said.
The Tier 2 concept is “undermining one of the essential requirements needed for a business to succeed,” Smith said: customer confidence. “Customers in Tier Two countries now worry that an insufficient supply of critical American AI technology will restrict their opportunities for economic growth.”
Without changes, Tier Two countries could look elsewhere for AI-related services, the company said. “And it’s obvious where they will be forced to turn. If left unchanged, the Diffusion Rule will become a gift to China’s rapidly expanding AI sector.”
Other American technology companies and industry groups have criticized the rule, saying it's too broad and risks damaging U.S. technological competitiveness (see 2501060015 and 2501080034). The European Commission said it will push the Trump administration to change the rule to include all EU member states in Tier 1 (see 2502200051 and 2502110074).
Microsoft said its ability to continue investing in AI technology depends on the revenue it earns from exporting and providing AI services abroad, which sometimes requires building AI infrastructure in other countries. “Ironically, the Diffusion Rule discourages what should be regarded as an American economic opportunity -- the export of world-leading chips and technology services," the company said.
Smith added that there are certain concepts mentioned in the rule that should be kept, including regulations aimed at ensuring advanced AI chips are only deployed in certified and trusted datacenters. The BIS rule would allow certain preapproved companies to obtain a single authorization from BIS to build data centers around the world -- except in arms-embargoed countries -- without having to apply for additional licenses.
The Commerce Department should make sure it has enough resources to quickly process those approvals while also strengthening enforcement against any “unlawful chip diversion,” Smith said.
But he said the fact that too many U.S. trading partners are left out of Tier 1 is a “significant problem.” The Trump administration should make the rule “simpler” and “stop relegating American friends and allies into a second tier that undermines their confidence in ongoing access to American products.”