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China wants the US to facilitate export control of key elements of artificial intelligence chips as part of a trade deal ahead of a possible summit between President Donald Trump and President Xi Jinping.
Chinese officials told Washington experts that Beijing hopes the Trump administration will ease export restrictions on high-bandwidth memory (HBM) chips, according to several people familiar with the issue.
US Treasury Secretary Scott Bescent has led China in three trade negotiations over the past three months. One said the Chinese team led by his vice president, Lifeng, raised the issue of HBM in some of those negotiations. The US Treasury declined to comment.
Before the August 12 deadline to avoid reaching the US and China’s trade deal and avoiding re-items of high tariffs, U.S. Commerce Secretary Howard Lutnick said this week that the government will likely extend the ceasefire by the 90th.
Beijing has been unhappy with US export controls ever since President Joe Biden announced measures in 2022 to undermine China’s efforts to buy or create advanced AI chips. In 2024, he banned HBM exports to China to export to China, disrupting Chinese chipmakers Huawei and Semiconductor Manufacturing International Corporation (SMIC).
The recent focus on export restrictions to China is on H20 chips Nvidia, designed for the Chinese market, after Biden banned exports of more advanced chips. The Financial Times reported on Friday that the US approved the H20 export license after NVIDIA CEO Jensen Huang met Trump.
However, those familiar with the issue said China is far more concerned about HBM control. This is because Chinese companies, including HUAWEI, are seriously constraining their ability to develop their own AI chips.
China’s push raised the alarm bell in Washington due to signs that Trump is willing to ease export controls to get a summit with XI.
The FT reported last month that the Commerce Department had been instructed to freeze China’s new export controls. Some officials are increasingly concerned after Trump overturned an earlier ban on H20 sales in July.
Gregory Allen, an AI expert at the CSIS think tank, said HBM was important for creating advanced AI chips and compromised about half the value of the chip. “To say that more advanced HBM sales should be allowed to China is exactly the same as saying that Huawei should help make better AI chips so that Huawei can replace NVIDIA.”
Those familiar with the US government’s debate on HBM said the Biden administration concluded that HBM chip export control would be the “single biggest constraint” on China’s ability to produce large-scale AI chips.
“Relaxing these controls is a gift for Huawei and Smic, allowing China to open its locks to start making millions of AI chips each year, while also diverting rare HBMs from chips sold in the US,” he said. “This is why China wants to revoke control and why they shouldn’t be at the table to negotiate.”
Another said China needs to package the HBM in order to package the logic components of the AI chip obtained by Sophgo in China for allegedly violating US law from Taiwan’s TSMC. He said HBM is a “big bottleneck” because memory chips are an important part of AI chips that package memory and logic chip components together.
The US Chinese embassy refused to discuss the issue of HBM, but said the US is “abusing export controls to curb China and seriously damaging the legitimate rights of Chinese companies.”
Due to Washington’s concern that Trump could ease export controls to get trade contracts, NVIDIA for selling game chips in China has new scrutiny that some groups are selling chips for AI applications.
Chinese companies are promoting two game chips (4090D and 5090D) for AI use. Nvidia does not sell AI chips. The development follows an FT report in the second quarter that smuggling allowed Chinese groups to acquire advanced NVIDIA AI chips worth $1 billion. At the time, Nvidia said: “To round up data centers from smuggling products is a technically and economically defeated proposal.”
John Mourenard, head of the House of Representatives China Committee, told FT that overseas export controls Nvidia and the Department of Commerce’s Industrial and Security Bureau (BIS) must take more action.
“Recent reports have revealed the enormous extent of China’s smuggling of advanced AI chips. Today, China is training advanced AI models by reusing gaming chips that are not normally subject to export control,” says Moolenaar.
“The scale and brave openness of this activity makes it clear that commercial BIS and Nvidia have to do more. Nvidia needs to increase due diligence to its customers, and BIS needs to increase enforcement.”
Nvidia said the US government has “explicitly confirmed that game cards sold in China do not require a license.” “Our gaming products are designed, manufactured and sold for individual gamers and consumers, and are sold in accordance with US export control laws.”
Nvidia said that retail consumers buy millions of graphics cards each year for gaming, academic and personal use, and that “cannibalism gaming cards are not a viable way to create computing clusters of data centers for AI.”
