The United States has taken a step toward ensuring that it will remain at the forefront of AI innovation and maintain global AI dominance.
Today, the Department of Commerce (DOC) initiated a rescission of the AI diffusion rule, which was reportedly a last ditch effort by the Biden administration to stifle innovation. The agency also announced extra steps to strengthen export controls on semiconductors worldwide.
America’s vendetta against Huawei continues
Huawei was mentioned specifically by the BIS because of America’s hostile relationship with the company, which is a side effect of its links to China and its communist party. Many lawmakers in the U.S. are convinced Huawei’s telecom equipment, which includes 5G infrastructure, could be used by the Chinese government for spying or cyberattacks.
Huawei has been subject to U.S. export restrictions since 2019, in an attempt to curb its access to advanced chips for 5G, AI, and smartphones. The limiting measures have forced Huawei to depend solely on domestic production, primarily through China’s Semiconductor Manufacturing International Corporation (SMIC), which uses a 7nm process but is saddled with yield and capacity limitations.
There are also reports of Huawei sourcing chips from Taiwan Semiconductor Manufacturing Company (TSMC) through proxies like Sophgo, potentially violating controls. TSMC stopped delivering shipments to Sophgo after finding out its chips were used in Huawei’s Ascend 910B, prompting a U.S. investigation.
The latest move from the BIS further affects Huawei’s ability to develop and deploy AI chips and the existing sanctions have ensured Huawei has limited access to cutting-edge manufacturing. The BIS’s decree also discourages firms that want a future with the United States from using Huawei’s chips, as they risk violating U.S. law, facing penalties or sanctions.
This could disrupt supply chains, especially for Chinese server companies testing Ascend chips.
Unsurprisingly, China’s Foreign Ministry has condemned U.S. controls calling it “technological hegemony,” while arguing that they violate market principles.
Huawei has denied producing chips via TSMC since 2020 or dealing with Sophgo. The company also claims compliance with export control laws through an internal compliance program (ICP) prioritizing obligations over commercial interests.
Despite the restrictions, Huawei has shown great resilience with its smartphone sales surging 64% in early 2024 after launching a 7nm Kirin 9000S chip, and there are plans to produce 70,000 Ascend 910C units that will rival Nvidia’s H100.
The AI diffusion rule would have held America back
Biden’s AI Diffusion Rule was issued on January 15, 2025, and had compliance requirements that were set to come into effect on May 15, 2025.
If it had been allowed to continue, the new requirements under the diffusion rule would have significantly slowed down American innovation and saddled companies with burdensome new regulatory requirements.
The AI Diffusion Rule would have also negatively affected the U.S.’s diplomatic relations with dozens of countries by downgrading them to second-tier status. The Bureau of Industry & Security (BIS) will publish a Federal Register notice formalizing the rescission and will also issue a replacement rule in the future.
Under Secretary of Commerce for Industry and Security Jeffery Kessler has also instructed BIS enforcement officials not to enforce the Biden Administration’s AI Diffusion Rule.
In a statement, the BIS said the new administration will “pursue a bold, inclusive strategy to American AI technology with trusted foreign countries around the world, while keeping the technology out of the hands of our adversaries.”
“At the same time, we reject the Biden Administration’s attempt to impose its own ill-conceived and counterproductive AI policies on the American people,” the BIS also said.
Some actions the BIS has announced that are geared towards strengthening export controls for overseas AI chips, include making sure everyone knows that using Huawei Ascend chips anywhere in the world violates U.S. export controls; warning the public about the potential consequences of allowing U.S. AI chips to be used for training and inference of Chinese AI models; and issuing guidance to U.S. companies on how to protect supply chains against diversion tactics.
