US tightens AI chip export ban

The Commerce Department moved on June 1 to close a gap in U.S. AI chip controls that had allowed some Chinese companies’ overseas units to keep buying advanced processors. New guidance from the Bureau of Industry and Security said a license is required not only for entities in China and Macau, but also for companies located elsewhere if their ultimate parent is headquartered in a restricted jurisdiction. The step narrows a path that emerged after the Trump administration in January shifted to case-by-case review for some advanced chip exports to China, including Nvidia H200 and AMD MI325X products under specified conditions. Reuters and other outlets reported that the new guidance means Chinese subsidiaries in places such as Malaysia can no longer rely on offshore status to avoid the licensing trigger. (bis.gov) ### What exactly did BIS change? BIS said the guidance “clarif[ies] that a license is required” for exports of advanced computing items to entities headquartered in Country Group D:5 or Macau, “even if the entities themselves are located outside” those places. The same rule now applies where the buyer’s ultimate parent company is headquartered in Country Group D:5 or Macau. The May 2026 guidance sits alongside earlier Commerce actions announced in May 2025, when BIS rescinded the Biden-era AI Diffusion Rule but said it would strengthen chip-related export controls and issue new warnings on overseas AI chip risks and diversion tactics. (bis.gov 1) (bis.gov 2) ### Why did this become an issue now? Reuters reported on June 1 that the guidance was posted after concerns that top U.S. AI chips may have been reaching subsidiaries of Chinese AI firms abroad for nearly a year. CNBC, citing Reuters, said the policy change suggested Washington believed its best AI chips may have been flowing to Chinese firms through offshore units despite broader restrictions. (bis.gov) Elizabeth Warren and Andy Kim, both Democratic senators, criticized the administration’s earlier approach and called on Commerce Secretary Howard Lutnick to testify before Congress, according to a Reuters report carried by The Straits Times. Tom’s Hardware, citing reporting around the loophole, said claims had surfaced that hundreds of thousands of advanced chips may have been acquired through the blind spot, though the exact volume remains unclear. (thejakartapost.com) ### What chips and companies are caught up in this? The January 13 BIS rule specifically named Nvidia H200 and AMD MI325X chips, and similar products, as subject to case-by-case license review for exports to China under security conditions. That earlier rule did not eliminate licensing scrutiny; the new June guidance broadens how BIS defines the covered customer by focusing on headquarters and ultimate parent ownership. (straitstimes.com) Nvidia and AMD are the U.S. chipmakers most directly exposed in the public reporting because their advanced AI processors dominate the training and inference market for large models. Reuters-based reports said the revised guidance is aimed at preventing those chips from reaching Chinese firms through foreign-incorporated affiliates. (bis.gov) ### How is China responding on the technology side? The South China Morning Post reported on June 1 that Chinese technology companies are redesigning AI chip strategies around application-specific integrated circuits, or ASICs, rather than relying only on general-purpose GPUs associated with Nvidia. The report said companies including Huawei, Cambricon, Moore Threads, Enflame and Iluvatar CoreX are part of a broader push to build a domestic AI chip ecosystem. (thejakartapost.com) A separate SCMP report said a Chinese research team had drafted a sanctions list covering 63 technology sectors, including semiconductors, AI, aerospace systems and supercomputing. SCMP described the list as a proposal rather than an announced government measure. (scmp.com) ### What comes next? The BIS guidance is already posted on the agency’s website, and exporters now have a clearer compliance test tied to headquarters and ultimate-parent ownership. Any further tightening would likely come through a formal rulemaking, while congressional scrutiny may increase if Lutnick is asked to testify. In China, the next visible markers will be whether ASIC-focused suppliers gain commercial deployments and whether any official body adopts the draft sanctions framework described by SCMP. (scmp.com) Those developments would show up through company launches, licensing filings and government notices in the coming weeks. (scmp.com) (bis.gov)