The scandal surrounding Nvidia CEO Jensen Huang's alleged involvement in espionage is expected to lead to tighter U.S. regulations targeting China's semiconductor procurement and the use of overseas data centers.
According to the South China Morning Post on November 11, U.S. experts believe that the controversy surrounding Huang and the political landscape shift following the midterm elections will bolster efforts to strengthen semiconductor export controls against China. The scandal has highlighted the smuggling of Nvidia semiconductors into China and the use of U.S. GPUs by Chinese companies through overseas data centers as new regulatory targets.
The U.S. has already restricted Nvidia's exports of advanced AI semiconductors to China, but it has not fully prevented smuggling through third countries. The complex global semiconductor supply chain, involving multiple intermediaries and resellers, makes it difficult to trace the final users. As a result, there is a possibility that U.S. authorities will intensify investigations into the distribution channels and end buyers of semiconductors heading to China.
Regulations are expected to extend beyond physical semiconductors. The remote access of Chinese AI companies to U.S. GPUs via data centers established in Southeast Asia, such as Singapore and Malaysia, is emerging as a new regulatory front.
A recent study by the Washington-based Institute for Progress indicates that Chinese companies secure advanced computing resources through four main channels: domestic semiconductors, legally imported low-spec U.S. semiconductors, smuggling, and remote access to overseas data centers. Even if the U.S. blocks direct exports and smuggling, alternative routes through overseas cloud services remain.
Legislative efforts are underway in Congress to include such remote access in export controls. The Remote Access Security Act, which passed the House in January, aims to expand the regulatory scope to include remote access to U.S. computing technology by certain foreign companies and institutions. Although it has yet to pass the Senate, this incident could reignite discussions on the legislation.
Analyst Kang Mengjie from consulting firm Huatuo Research noted that the results of the midterm elections and the investigation into Huang will increase pressure for enhanced export controls and enforcement. Ben Reynolds, a senior analyst at Rhodium Group, pointed out that Huang was one of the most influential figures opposing semiconductor export controls, and his weakened position could contribute to the push for stricter regulations.
From China's perspective, the challenges in securing advanced semiconductors could also impact the acquisition of computing resources necessary for AI model development. While Chinese AI semiconductors, such as Huawei's Ascend series, are emerging as alternatives, they are not expected to match the performance and production capacity of U.S. GPUs in the short term. However, completely blocking all alternative routes may prove difficult for the U.S., as cooperation from countries hosting overseas data centers, like Singapore and Malaysia, is required for regulation. As U.S. regulations tighten, there are analyses suggesting that Chinese companies may accelerate the development of their own AI semiconductor and software ecosystems.
Meanwhile, The New York Times reported that U.S. intelligence agencies suspect that the woman linked to Huang may have engaged in information-gathering activities for China. China has denied these allegations as baseless slander. Additionally, with bipartisan lawmakers urging the processing of related legislation, both Huang and former President Donald Trump, who has actively defended him, are facing increased political pressure. Indeed, voices in Congress have called for the advancement of semiconductor export control legislation against China, which Nvidia has strongly opposed.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.