Chipmakers Nvidia and AMD have received new export rules from the US Department of Commerce regarding the sale of their high-end AI chips to China. 

The move comes after an August announcement that the US would be curbing the export of the software and materials required to make high-end chips. The restriction on the chipsets is likely to hamper China’s semiconductor sector’s ability to compete on a global scale. In addition, the curb is likely to severely impact Chinese firms’ ability to work on AI-powered computational tasks. As for Nvidia, the new export rules are likely to put a dent in its business in China.

Also Read: US ban on export of AI chips to China: All you need to know

Why the ban?

At its core, the changing export rules are an attempt to hamstring China’s semiconductor business as well as put them behind with regard to advancements in Artificial Intelligence.

Back in August, the Department of Commerce had adopted new export rules regarding the sale of technology that would benefit semiconductors and gas turbine engines, saying that they were important to national security, according to a report from Reuters. At the time, the department had said that the technologies had both commercial and military applications. 

The same month, President Joe Biden signed a bill to boost competition in the US and outpace China’s tech advancements by subsidizing the production of chip manufacturing and hiking research funding. Additionally, the US government is planning to limit the export of American chipmaking equipment to companies in China. But the move will impact  South Korean companies like Samsung Electronics and SK Hynix, both of which have massive factories in China. 

While the Biden administration hasn’t drafted anything concrete yet, according to sources who spoke to Reuters, the move will likely make it much harder for China’s largest chipmaker SMIC, to effectively cover the country’s markets as well.

Tensions regarding the tech sector are likely to reach an all-time high, which first began in 2018 after the Donald Trump administration began a trade war with China in 2018. Tensions have deepened since the Biden administration took over.