Which Country Will Biden Target Next with Its Semiconductor Regulations?

The Biden administration, which is weaponizing semiconductor exports as a diplomatic tool, has set its sights on a new location other than China: the Middle East, a region known for its close ties with China. They’ve abruptly imposed controls on the export of AI-specific semiconductors to the Middle East.

On Aug. 28, Nvidia disclosed this fact in its second-quarter report submitted to the Securities and Exchange Commission (SEC). Nvidia stated, “In the second quarter of fiscal 2024, the U.S. government notified us that we need additional permission to sell our A100 and H100 product lines to certain customers in the Middle East and other regions.”

The H100 is Nvidia’s high-performance AI chip, popular worldwide, priced at US$40,000 each. It’s a crucial semiconductor for researching or producing generative AIs like ChatGPT.

This isn’t the first time the U.S. has sanctioned Nvidia. Last August, the U.S. government banned Nvidia from exporting A100 and H100 semiconductors to China, fearing that China’s AI technological progress would threaten U.S. national security.

However, Nvidia’s report did not specify which Middle Eastern countries need export approval. According to Reuters, Nvidia recorded most of its US$13.5 billion second-quarter sales coming from the U.S., China, and Taiwan. Sales in other countries accounted for 13.9% of total sales, but the proportion from the Middle East was not disclosed.

The Biden administration seems to be targeting the Middle East to curb its biggest adversary, China, suspecting that semiconductors sent to the Middle East are subsequently moving to China. In fact, last year, China and Saudi Arabia signed a partnership to cooperate closely in the AI field. Prominent Chinese researchers are based in Saudi Arabia’s leading research institution, King Abdullah University of Science and Technology (KAUST). It’s reported that through KAUST, Saudi Arabia purchased at least 3,000 of Nvidia’s H100 chips.

Another reason for the sudden regulation appears to be the Biden administration’s tough stance on Saudi Arabia, especially as oil prices in the U.S. approach an average of US$4 per gallon. This is a concern for President Joe Biden’s re-election bid. While the U.S. requested Saudi Arabia to increase production, the Saudis announced continued cuts. Last year, Biden warned Saudi Arabia of consequences for similar actions, and it’s known that Saudi Arabia is now considering nuclear power plants from China or Russia.

If Biden tightens semiconductor controls against the Middle East, South Korean companies may face difficulties. High-spec AI semiconductors like Nvidia’s H100 require High Bandwidth Memory (HBM), and the only companies capable of producing HBM are SK hynix and Samsung Electronics.