US Needs Better Chip Export Tracking, Governance Tools, BIS Advisory Committee Hears

Think tanks and other researchers have previously called on U.S. companies to monitor their sensitive chip-related exports through location tracking or other hardware, including through “on-chip governance mechanisms” -- physical devices built directly into the semiconductor that would allow the chip to be used only in situations that comply with export controls or the terms of an export license (see 2401080060). Samuel Hammond, chief economist with the Foundation for American innovation, said it’s time to act on those recommendations.

“We basically need new mechanisms, country-based controls, digital waybills, pre-approved logistic providers -- the ideas here have been published by many groups. They're not totally secret,” Hammond told members of the BIS Emerging Technology Technical Advisory Committee during a March 10 meeting. “We just need to do them.”

Hammond said current export restrictions aren’t working. There’s “growing evidence of in some cases, flagrant” violations of the Export Administration Regulations by chip companies, he said, pointing to several recent media reports that say China has been able to illegally acquire advanced semiconductors despite U.S. controls. One report from the Wall Street Journal this month said Chinese companies are buying leading semiconductor firm Nvidia’s latest chips by routing them through third parties in nearby countries.

U.S. entity-based export controls, including BIS additions to the Entity List, “are not scaling particularly well,” Hammond said, and “end-user verification” for advanced chip exports is “non-existent.” Instead, the chip industry needs “better mechanisms to ensure that these export controls scale,” he said.

One suggestion, floated by researchers with the Center for a New American Security, could allow companies to verify the location of a chip by “placing secure landmark servers in key positions around the globe, which would send and receive ‘pings’ to exported AI chips to calculate the maximum possible distance between the chips and the servers.”

Other recommendations call on BIS to encourage companies to use on-chip mechanisms by removing certain export licensing requirements from chips that already have those hardware security features built in. This “conditional” export licensing concept could be applied to the BIS artificial intelligence diffusion rule released in January, Hammond said, which outlined new worldwide license requirements for certain shipments of advanced AI chips (see 2501130026).

Under the rule, countries in Tier 1 face minimal licensing rules, while countries in Tier 2 face more restrictive requirements. If there are companies in Tier 2 “that are suspected of facilitating diversion into China,” Hammond said BIS “could explore ways of conditioning export controls on chip sellers and exporters” to those countries with “some means of location verification and end-user verification, including things that are technologically enabled.”

BIS officials last year said the agency wasn’t close to implementing any recommendations for on-chip mechanisms because the technology still needed to be studied and refined (see 2403270047). One TAC member during the ETTAC meeting also questioned whether location-tracking features for chips would work, pointing out that some researchers have argued that it’s “easy” for some foreign countries to bypass them.

Hammond said it may be easier for “sophisticated” state actors, like China, to work around those guardrails. But he also said that many of the advanced chips acquired by China are first passed through less sophisticated companies in other regions that then sell to China.

“My philosophy on this is that we shouldn't make the perfect the enemy of the good,” Hammond said. “Most chip smugglers and these intermediaries are not so sophisticated, and I think it can serve as a source of deterrence. When you're talking about chips being imported by the hundreds of thousands, potentially one day by the millions, and every one of those chips potentially having some form of location-verification on board, that adds significant friction.”

He noted that some more advanced on-chip mechanisms likely need several more years of research and development.

Hammond also said BIS needs more resources, including enforcement officers abroad. The agency only has a handful of export control officers in Asia. “We need more people,” Hammond said, and “better technology at BIS more generally for license processing and supply chain monitoring and the rest.”

He added that China “seems to be catching up rapidly” to U.S. chip technology and has specifically made “strides” in lithography -- a crucial step in the chipmaking process.

“I think that is an area that needs deep exploration to figure out what other core components and subcomponents could be added to export controls to continue to, in this game of Whac-A-Mole, to do things, not just half-measures,” he said, “but to really commit.”