Key Findings

• U.S. Export Controls Tightened 2022-2023: Biden administration imposed licensing requirements on Nvidia’s H100 and later H800 chips to prevent countries such as China from gaining access to this technology. 
• Nvidia’s Response: Developed the H800 chip with less performance to bypass U.S. restrictions; however, this then became subject to U.S. requirements when legislation was amended. 
• Tier Classification: The Bureau of Industry and Security categorizes countries into tiers (1-3) based on their trustworthiness and national security risks. China is among Tier 3, which makes it subject to the most intense restrictions. 
• Asia-Pacific Semiconductor Production Domination: The region accounts for 53% of semiconductor production, with Taiwan leading, followed by South Korea, China, and Japan. 
• China’s Influence: China is seeking to overtake Taiwan in Semiconductor production this year, with the potential to create disruptions in global supply lines. 
• Tensions in the South China Sea: Instability surrounding Taiwan and global chip disruption increase the need for export controls. 
• Impact on Business: Entities in Tier 3 countries (such as China) face heavier restrictions on exports to ensure regimes are compliant with U.S. requirements. 
• Future Outlook: Export controls will likely be further tightened as AI and chip technologies become more integral in national security dominance. 

Summary

This report is centered around the tightening of U.S. export controls on these high-performance semiconductor chips, specifically Nvidia’s H100 and H800, and their involvement in national security concerns. It should be noted that H800 falls under ECCN 3A090; monitor BIS updates. The U.S. Biden administration restricted exports of the H100 to countries like China, as they were concerned with AI chips being implemented in military and/or surveillance applications. Nvidia then created the H800, which bypassed these restrictions. Although in October 2023, the U.S. extended licensing requirements to the H800 additionally. This intensified regulations and oversight of chip production. 

This policy shift displayed increased geopolitical tensions in the Asia-Pacific region, which is where over half of semiconductor production occurs globally. China is rapidly expanding its capacity to produce semiconductors despite Taiwan and South Korea leading the world in production and exports. Conflict over Taiwan could destabilize global supply chains and increase reliance on countries such as China for these semiconductors. These factors all impact AI development, trade, and strategic competition globally.