Illusion of control
Donald Trump is right to ditch Joe Biden’s chip-export rules
Time to get realistic
Its weapon of choice has been export controls on the sale of ai chips to China.
But, as we report this week, controls so far have been leaky.
A burgeoning grey market exists for the wares of Nvidia, America’s chip champion.
Chinese firms lease access to offshore data centres or buy chips through intermediaries.
Export controls have conspicuously failed to stop Chinese tech from surprising the world.
The Biden administration thought the answer was to cast a wider net.
In its final days it announced a sweeping plan for a licensing regime that would have spanned much of the globe.
Unfortunately, this would have been a bureaucratic nightmare, and on May 7th the Trump administration rightly said it would ditch the rules and replace them with something simpler.
As it rethinks its approach, it should proceed with care.
Chip restrictions may offer the illusion of control.
But they bring with them a range of unwanted consequences.
The problem with the Biden rules was that they were unworkably complicated.
Close allies would have faced few restrictions; China and Russia would have been barred outright.
But some 120 middle countries, such as India, Singapore and the United Arab Emirates, would have become subject to a labyrinthine licensing regime.
Tracking the use of chips around the world would have been impossible.
The Bureau of Industry and Security (BIS), which was supposed to enforce it, is short-staffed and poorly equipped.
As the Trump administration mulls new rules, it needs to be realistic.
Chip controls are always going to be leaky.
Export controls can work if they are narrowly applied.
Banning China from importing extreme-ultraviolet (EUV) lithography machines has successfully delayed its efforts to make the most advanced chips, for instance.
But EUV tools are easy to track: they are made only by asml, a Dutch firm, and only around 50 of them are sold a year, each weighing more than 100 tonnes.
Controlling the sale of ai chips is a different story.
They are smaller, more versatile and far more numerous.
Nvidia alone expects to sell more than 6m of them this year.
Moreover, chip controls on China will have a half-life.
For more than a decade China’s government has poured billions of dollars into its semiconductor sector, in the hope of achieving self-sufficiency.
But the breakthroughs came in earnest only after America began tightening its export controls, giving businesses a reason to look for alternatives.
Huawei, China’s tech champion, recently unveiled an AI system that is said to match Nvidia on some measures.
China still relies on foreign tools, and lags behind on chips at the cutting edge.
But it is closing the gap.
This means that widening the net to others will bring few benefits, but big costs.
A wide-ranging system of licences would do little to stymie China.
But it would push middle countries towards Chinese suppliers—not because they prefer them, but because their chips are easier to obtain.
Mr Trump’s administration is reportedly considering using access to ai chips as a bargaining chip in trade talks.
But if a rules-based system descends into wheeling and dealing, many countries may see American suppliers as unreliable.
This could shrink American firms’ market share and diminish their technological leadership.
Chip controls alone cannot be America’s way of staying ahead.
At best they might buy some time; at worst they do not work at all.
If America is to win the ai race then it will need all the ingenuity, talent—and friends—it can get.
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