By James Erwin
Despite President Trump’s victory last month on a pledge to cut bureaucracy and regulation, the Biden administration is rushing through midnight rules on their way out the door. This week, the administration announced one of its most brazen attempts yet at central planning under the guise of “national security”: a chip export control rule that would dictate American companies’ allowed global market share, practically inviting companies linked to the Chinese Communist Party to fill the void.
The Biden Administration’s chips policy has long been backfiring due to short-sighted export controls and politicized subsidies. Their latest attempt to impose new export rules before January 20th is even more ill-considered. Supposedly to prevent foreign adversaries like the CCP from gaining access to frontier computing systems, Politico reports, Biden’s national security team is considering limiting exports of GPUs through aggregate country caps.
This means the White House would dictate how many advanced chips and GPU systems can be sold to each foreign country (besides our exempted close allies), who gets to sell them, and how many may be sold. This will amount to White House officials picking winners and losers by deciding every American company’s global market share, a degree of central planning Stalin could only dream of.
Frontier systems, or the most advanced and sophisticated computing systems available, would not be the only ones affected by this restriction. Even though frontier AI is the target, arbitrary country-level compute caps are a blunt instrument that would crush most trade in chips and computer systems. This would crush the industry overnight.
Even if the incoming administration were to reverse Biden’s haphazard policy, President Trump won’t take office for over a month and filling out the staff that might address this portfolio will take even longer. By that point, the damage will have been done and will last for years. The lack of certainty in the interim alone could be catastrophic for American chip and GPU makers, who are not only engines of economic growth but world leaders in their industries – it would both hurt the U.S. economy and sacrifice our advantage over the very adversaries the rule seeks to hurt.
The rule is also probably impossible to enforce, or at least costly and time-consuming. It would be nearly impossible for exporters know whether a shipment would bring a country over the compute-cap unless there was a burdensome process whereby a government agency reviewed each sale regardless of size and aggregated sales information from all of industry, including foreign firms.
And this policy, too, will backfire. As the U.S. government restricts developing countries’ access to our innovations, where does anyone expect those countries to turn except the second-largest economy that is not restricting chip exports? These restrictions are effectively a welcome mat to the CCP to move into developing economies hungry for computing power.
The irony in all of this is there is a way to restrict access to frontier AI: by restricting access to frontier AI. The Biden Administration should instead consider controlling countries’ number of system installs and clusters rather than the total number of GPUs.
Importing American hardware does not mean one can simply build a frontier AI system from the component parts. Frontier systems require staggering quantities of GPUs – between 100 and 400 thousand. Without legions of trained engineers who have experience networking and troubleshooting the systems, as well as sophisticated energy infrastructure and advanced cooling systems, GPUs fail. They require constant monitoring, maintenance, and support to work.
Most countries looking to benefit from American AI breakthroughs do not need and will not be able to import anywhere near this scale of compute power to serve their purposes. They do not have the capital, expertise, or frankly the desire to build frontier systems with imported chips and GPUs. The number of countries that do is small and can be monitored more easily than the whole world.
The Biden Administration should back off from this destructive rule and focus on the proliferation of actual frontier systems rather than hardware purchasing. If they do not, they will crush American innovators, impose a system of central planning on our most valuable companies, and invite the CCP to dominate world computing.
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