China’s US Chip Probes, Curbs Seen as More Than Just Trade Negotiation Tactics
Beijing’s directive this week that banned its top technology companies from buying certain Nvidia chips could be aimed at boosting its leverage amid trade negotiations with the U.S., technology policy analysts said. But they also said the U.S. shouldn’t assume the ban is just a negotiating tactic, arguing that it may signal that China is doubling down on efforts to reduce its dependence on advanced U.S. chips and other technologies.
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“The jury's out for me in terms of how much they actually mean that,” Dan Kim, former director of strategic planning and economic security for the Commerce Department's Chips for America program, said, referring to the China ban. “They're torn because they want to have AI capabilities, and the best chips are American-sourced chips. And yet they don't want dependence on U.S.-made chips. So they're in a dilemma.”
China’s internet regulator earlier this week told multiple top tech companies, including ByteDance and Alibaba, to cease orders of the RTX Pro 6000D, Nvidia’s tailor-made chip for the country, the Financial Times reported. Also this month, Beijing accused Nvidia of violating anti-monopoly laws after the Trump administration announced in August plans to allow the sale of Nvidia's H20 chip to China in exchange for the U.S. keeping a cut of the sales revenue (see 2509050036, 2508110044 and 2508130039).
Kim -- who's now chief strategy officer of TechInsights, a technology analysis firm for the chip industry -- said he thinks Beijing’s restrictions are “a signaling tool” from China about “what's going to be on the table and what's not going to be on the table” during ongoing trade talks.
“I think both sides are trying to put as many things on the table as possible for them to negotiate with each other. [That's] sort of how I'm interpreting that,” Kim said during an event this week hosted by TechInsights.
But he said China may also be signaling that it’s willing to cut off purchases of advanced Nvidia chips as part of its broader strategy to reduce reliance on foreign-made, cutting-edge technology, especially from the U.S. “I think what you're seeing is signaling that China is OK to be less dependent on U.S.-made chips or U.S.-sourced chips, even if it comes at a cost to advanced AI systems.”
Chris Miller, a nonresident senior fellow at the American Enterprise Institute think tank, agreed, noting that it’s unclear how much Beijing prioritizes access to advanced chips. Although U.S. AI companies and the U.S. government “all believe that AI is important,” the Chinese government's view of AI is “a lot less clear,” he said.
“I do think there's some uncertainty as to what extent Chinese political leaders prioritize access to compute,” Miller said, adding that President Xi Jinping has been “hesitant about AI.”
“To me, that uncertainty persists, and you see it in this decision-making about regulating Nvidia,” Miller said. “We're not sure whether it's actually an effort to block out foreign chips or a negotiating tactic, and perhaps Xi’s not sure either. And part of that uncertainty, I think, does stem from this uncertainty in the system in China about how important compute is and how significant AI will be over the coming years.”
The speakers also discussed China’s decision this week to launch anti-discrimination and antidumping probes against U.S. analog chips (see 2509150012). Kim said he thinks the probes are meant to boost Chinese leverage during trade talks, but they also show that Beijing is growing more “confident” that its legacy chip industry “can stand without reliance” on American-made semiconductors.
“I think they're a little bit more confident now in starting these kinds of skirmishes, if you will, policy-wise,” he said.
Miller said he doesn’t believe they’re empty threats. “If you make threats in negotiations, you often have to carry them through,” he said. “And I think we should assume there's at least a reasonable chance that China will have to carry through on these threats because negotiations don't turn out exactly as Beijing would like.”
Miller and Kim were also asked about Chinese firms that are establishing joint ventures with U.S. or European companies -- including joint ventures headquartered outside of China -- and using them to sidestep U.S. export license requirements. Miller said the U.S. likely will always look to tighten its regulations to address companies finding new export control loopholes.
“I think this is going to be a game of, I don’t know if cat-and-mouse is the right analogy, but regulation and response, indefinitely, as companies try to keep doing business, which is what they're meant to do, and governments try to find the right tools to achieve the result that they have in mind,” he said.
Kim said there’s sometimes a disconnect between what U.S. regulators are intending to accomplish with their export controls and what the rules actually prohibit. Violating the intent of a rule, even if not illegal, could be a costly mistake for American companies, he said.
He gave the example of a U.S.-headquartered firm that “primarily” does all research and development or production in China but is able to avoid certain licensing rules because the company is based in America.
“If you suspect that a year from now, the regulators will catch up to that, and then you're going to have to rip and replace that machine, that's a very costly proposition for a fab to deal with,” Kim said. That scenario presents an “added challenge” for compliance teams, he noted.
“I think, more than ever now, the compliance teams and legal teams of these companies are going to have to make sure that they have a close coordination and understanding of where regulation is headed, even if it's going to be slow,” Kim said. “Changing that midway through your production is very costly. And so it's going to be risk management, I think, going forward for these companies.”