Anyone, anywhere using Huawei Ascend chips could be prosecuted for violating US export restrictions according to new rules issued by the White House in May.

 

A Chinese company using a 100% Chinese designed and manufactured chip, in China, and having nothing to do with the rest of the world whatsoever, would be violating US export restrictions under the new rules and so subject to sanctions and/or criminal prosecution. So, you better stick to US AI chips. At least that is the idea behind the new rules.

At the same time anyone, anywhere using US AI chips (Nvidia) to deploy a Chinese Large Language Learning Model also faces "consequences" for not running US software on the chips.

The upshot? Practically speaking, you're only allowed to use Nvidia chips, and you're only allowed to run American AI models on it. Everything else is outlawed.

This is the most insane part of the new US export controls. If you're a Chinese company, in China, with zero relations to the US and you buy Huawei Ascend chips, then you're held criminally liable for doing so under US extraterritorial law.

Those “consequences” include:

You get added to the Entity List, which effectively means you get completely cut-off from international financial systems as global banks refuse to process your transactions out of fear of violating US sanctions. You also get completely cut-off from future access to any US-linked technology, software, or services.

Potential sanctions on the company executives, jail time if they travel to the wrong country, etc.

What this means is that China's only strategic option here is to accelerate tech and financial decoupling from the U.S. so that these sanctions have no bite anymore.

Will this ultimately work out in the US's favour? It's far from certain: in seeking to cut off the world's - including China's - access to Huawei products, they might ultimately cut themselves off from the world as China responds by building alternative ecosystems that bypasses them.

The previous attempt to impose exports controls on technology sold to China – that included the threat of nixing the passports of any US technician that works for a Chinese company in China – have failed, according to study by the Federal Reserve Bank of New York.

US export controls on technology exports to China have backfired, hurting US technology companies, and have been unsuccessful in cutting China off from the technology, thus driving innovation in China’s technology sector, according to the report.

Arnaud Bertrand is an entrepreneur and China analyst. Can be found on X @RnaudBertrand. Bertrand founded HouseTrip, a leading European vacation rental marketplace, and is founder and CEO of Me & Qi, a premier English-language platforms for Traditional Chinese Medicine. He is also a graduate and honouree professor of Founder & CEO of Me & Qi, one of the premier English-language platforms for Traditional Chinese Medicine. He is also a graduate and honorary professor of Ecole Hôtelière de Lausanne in Switzerland.