The Bureau of Industry and Security (BIS), which belongs to the U.S. Department of Commerce, has an especially important role in managing export controls for semiconductors to China. In 2021, Commerce Secretary Gina Raimondo referred to the BIS as a "small but mighty" agency that is essential in the government's security initiatives. The agency's decisions could have a great impact on Nvidia's operations.
Rumors of potential U.S. restrictions on semiconductor exports to China has put the Bureau of Industry and Security (BIS), a small yet powerful arm of the Department of Commerce, in the spotlight. President Joe Biden is considering tighter controls on the export of advanced artificial intelligence (AI) computing chips to the world's second-largest economy.The BIS is responsible for implementing the U.S. export control regime to stop critical high-tech and defense items from falling into the wrong hands. Commerce Department decisions, made by the BIS, have a big impact on corporate profits.Chipmakers were impacted in 2022 when the BIS told Nvidia that its A100 and H100 chips would be subject to new licensing requirements to export to China. Nvidia forecasted around $400 million in Chinese sales could be lost without customers opting for an alternative product. Subsequently, Nvidia unveiled a lower-end version of its AI chip for the Chinese market, the A800, which does not need a Commerce Department license.The Wall Street Journal recently reported that Biden could restrict even the A800 chip from export, which sent Nvidia's shares down 2%.The BIS implements the Commerce Control List, which outlines which product specifications require licenses to be sold abroad. It often targets a few items from a select group of vendors. In this case, Nvidia and Advanced Micro Devices reign supreme in producing the high-powered processors used in AI models.Should an export restriction be enforced, the companies would have to make sure their high-tech chips don't end up in the Chinese markets. Seagate, a hard drive manufacturer, found this out the hard way in 2020 when it kept supplying Huawei after it was blacklisted. The BIS fined the company $300 million, but the financial damage amounted to $1.1 billion as Seagate had immense business in China.
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