Last month, the Trump administration quietly reversed one of its own policies by lifting the ban on China from US tech giant Nvidia's H20 microchip export ban.
Another U-turn may not sound like a notable development for those who have followed Donald Trump's unstable record of trade.
However, this time, the stakes are much higher as these microchips are important to power the next generation of artificial intelligence.
Whichever country controls microchip production, it could lead the global AI race with a major impact on military strategy and economic production.
For almost three years, the US has been trying to protect these powerful chips from China's hands.
So, by reopening the door, did Trump give Beijing the great advantages of AI?
We spoke with three experts and explained how we came here.
What has changed?
In April, the Trump administration banned the export of H20 microchips to China, and restrictions were tightened by the Biden administration. Since then, it has reversed that decision.
Experts warn that by limiting microchips exports, China will encourage it to accelerate domestic development. (News Video))
The backflip could be in response to booming black market demand for China's powerful US chips, according to Jason van der Scheif, a technical and security program fellow at Australia's Institute of Strategic Policy.
“In just a few months, more than a billion dollars of limited chips were smuggled into China,” he said.
“The reversal could be a pivot by the administration. If you don't provide a legitimate channel for a slightly degraded chip, the buyer will simply turn around you.”
Professor Sharier Achter, who specializes in advanced analytics and AI research at Wollongong University, said the move “seems to follow Silicon Valley philosophy.
Mohammad Hossain's associate professor of information systems at Curtin University suggested that the Trump administration was trying to kill two birds with one stone.
The US is trying to maintain leverage with broader geopolitical trade-offs, including rare earth elements, a key export to China, but “China relies on US technology,” he said.
Hang Old, what is the H20 chip?
Nvidia is the technology giant behind the highly popular microchip and is led by Jensen Huang, the ninth most abundant man in the world.
After Washington tightened its export controls, at least US$1.5 billion ($1.5 billion) of Nvidia microchips have been smuggled into China in the past few months. (Reuters: Robert Galbraith))
The H20 is a step down from Nvidia's top tier tips (H100 and B200) and is specially designed to comply with US export restrictions towards the Chinese market.
“fundamentally, [H100 and B200 chips] You can do things much faster than the H20,” van dersheif said.
“If we consider how quickly AI is moving obstacles that could be brought to time more than anything, we're going to maintain our strategic advantage in the US.”
The H20 is not that strong, but van dershev warns that “these are not toys…even slightly downgraded chips still allow model training on scale.”
“If you're worried about national security, accessing the enemy with just one bouncing tip on the ladder still poses strategic risks.”
Can this strategy backfire?
The US hopes to stall China's progress in artificial intelligence, but experts have warned that the strategy may have the opposite effect.
China's push to control AI is already underway, urging people to restrict exports to H20 chips alone and accelerate domestic development.
“Currently, 50% of AI researchers worldwide are produced in China alone,” Dr. Akter said.
Chinese tech giants like Huawei and Biren Technology have been increasing their own AI accelerators.
“Huawei chips are already deployed in major training clusters,” said Van Der Schyff.
Chinese company Huawei is looking to build high-performance GPUs and AI accelerators to compete with Nvidia. (Reuters: Ally Song))
Still, China's domestic development has turned its back on industry leaders when it comes to cutting-edge manufacturing, such as Taiwan's TSMC and South Korea's Samsung.
“While there's not necessarily a risk that China will catch up overnight, these restrictions give Beijing a clear incentive to participate in industrial policy for its own semiconductors to accelerate domestic progress,” van der Schaff said.
“If they are only given a degraded version, it is very likely that they will intensify their efforts to do it domestically.“
“We've seen this in 5G and in aviation too.”
The advancement of AI in China is the “black box”
All three experts warned that measuring China's true AI capabilities would be difficult.
“It is unclear how well China's artificial intelligence has developed given the closure of China's systems and the tendency to not always tell the truth,” said van der Schaff.
Dr. Akter used analogy to explain uncertainty. “There are two types of AI technology.” One is called a glass box and the other is called a black box.
“Glass Box technology is essentially an explanatory AI, open source, and can explain where the data comes from, how it is used to develop AI models, and how it results can be obtained.”
Blackbox technology is the opposite, but you cannot go back to the source of data and you cannot know which models are used.
That opacity makes it difficult for other worlds to assess whether Beijing is catching up or moving forward quietly.
Countries that dominate microchip production are likely leading the global AI race, which has had a major impact, experts said.
“This is the forefront of geostrategic rivalry.”
Van der Scheif said.
“The countries that control calculations will control AI, and AI will shape everything from military planning to economic productivity.”
