Cantwell, Cruz: Rethink “Draconian” Market Caps on International Chip Sales

Driving international sales of chips to China’s Huawei is not a good outcome. Yet that’s exactly what might happen if President Joe Biden’s outgoing team releases a rumored draft Executive Order that would set up specific rules capping the sale of advanced AI chips to foreign nations other than China.  A December 19, 2024 letter from Senator Maria Cantwell (D-Wash.), Chair and Sen. Ted Cruz (R-Tex.), Ranking Member of the Senate Commerce, Science and Transportation Committee, urged the administration to slow down, and let affected companies review and weigh in on the restrictions in order to prevent unintended consequences.

The U.S. Department of Commerce has been widely praised for enacting tight export controls on specific advanced chips used to further AI. Their central goal is to restrict China’s ability to produce the types of advanced semiconductors needed for military applications. 

This next rule aims broadly to stop China from sourcing advanced AI chips via third parties.  While no one wants those chips in China’s hands, Cantwell and Cruz point out that misguided mechanisms could end up limiting the ability of US companies to sell their products abroad.

The flourishing black market in AI capacity is a reminder the ultimate win comes from cash to pursue innovation and generate global market share. 

Secure telecom, space exploration, quantum computing and more depend on a vibrant American semiconductor manufacturing sector, their letter pointed out.  If American companies are overly restricted in the types of chips and products they sell abroad, companies like Huawei will step in to fill demand and China’s market share will grow.  Ultimately, Huawei and others may develop alternatives, and the US influence over the global AI landscape could diminish.