US AI Chip Export Rules Affect India

Source: The post US AI Chip Export Rules Affect India has been created, based on the article “What is U.S.’s new rule for exporting AI chips?” published in “The Hindu” on 23rd January 2025

UPSC Syllabus Topic: GS Paper3- Science and Technology- Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.

Context: The article discusses new U.S. regulations on exporting advanced AI technology and chips. It divides countries into three tiers with different rules. India and China fall under the second tier, requiring authorization for certain AI-related transactions. The goal is to protect U.S. security.

For detailed information on US Restrictions on AI Chips and Its Impact on India read  Article1, Article2

What Technology is Being Regulated by U.S?

1. The U.S. Bureau of Industry and Security (BIS) is regulating the following technologies:

• Advanced Computing Chips: These are integral for running sophisticated AI operations and data processing.
• AI Model Weights: Specific configurations and setups of AI models that dictate how data is processed and the quality of outputs.

2. The regulations update how these technologies are exported, re-exported, or transferred within countries. They categorize countries into three tiers:

Tier 1: Includes 18 allies like the U.K. and Canada, with no restrictions.

Tier 2: Includes China and India, requires authorizations for certain transactions.

Tier 3: Includes countries like North Korea and Iran, which are barred from accessing the technology.

What Are the Concerns About These Regulations?

1. Impact on U.S. Global Competitiveness: Critics argue that the regulations might undermine the innovation that has kept the U.S. ahead in the tech sector. For example, Ned Finkle from NVIDIA expressed concerns that controlling widely available technology does not enhance U.S. security.
2. Availability of Alternative Suppliers: Ken Glueck of Oracle noted that the rules ignore the existence of non-U.S. chip suppliers. He argues that companies can achieve the same performance by sourcing GPUs from alternative suppliers like Huawei and Tencent, thus undermining the effectiveness of the regulations and impacting U.S. competitiveness in the global market.

How Do These Rules Impact India?

1. Requirement for Authorization: Indian companies must obtain Validated End User (VEU) authorization to use exported advanced AI chips for both civilian and military purposes, excluding nuclear applications.
2. Impact on Data Centers: Large Indian data centers that want to deploy these advanced technologies will need to navigate these new bureaucratic hurdles to speed up their operations.
3. Exclusion from Trusted Allies: India is notably absent from the list of trusted allies and partners, likely due to concerns over past technology leakages to countries like Russia.

Question for practice:

Discuss how the new U.S. regulations on exporting advanced AI technology and chips impact India’s technology sector.