US-China Tech Tensions Intensify as Washington Blacklists More Chinese Companies

The US has blacklisted more Chinese companies and added them to the country’s list of restricted entities. According to Reuters, the 25 newly blacklisted firms include Sophgo and Zhipu AI.

Sophgo was blacklisted because a TSMC-manufactured chip was incorporated into Huawei’s AI processor illegally. Zhipu, which develops large language models, was targeted for using AI research to modernize the Chinese military.

US Interests

The US adds companies to its Entity List when it views their activities to be contrary to its foreign policy or national security interests. Companies that appear on the US trade blacklist cannot receive technological or non-technological exports without a license. Often, their applications for a license are denied.

Zhipu AI and nine other entities were blacklisted for applying advanced AI research to promote military modernization in China. The company has attracted investors from leading Chinese companies including Tencent and Alibaba. Sophgo is among 16 Chinese companies that have been sanctioned by the US government for developing chips that advance China’s weapons systems, high-tech surveillance applications, and for posing a diversion risk to Huawei.

Sophgo captured the attention of the US government after an AI chip that matched one it had ordered from TSMC was found in a Huawei smartphone, Ascend 910B. The US placed Huawei on its Entity List back in 2019. Last year, several other Chinese companies were blacklisted by the US Commerce Department after they were perceived to be part of Huawei’s proxies.

Lacking in Facts

Zhipu AI has reacted to Washington’s decision to place it on the Entity List. Through a post on its WeChat page, the company termed the decision as one that lacked facts. Zhipu also said the decision will not have a substantial impact on its business due to its mastery of large language models’ core end-to-end technology.

Sophgo is yet to respond to the blacklisting decision. However, the company denied any direct or indirect engagement with Huawei in October 2024, when the allegations first surfaced. The company is affiliated to Bitmain, which supplies Bitcoin mining equipment.

Earlier this week, the US government introduced new regulations that restrict AI chip and technology exports. Under the new rules, the US will limit the amount of AI chips that big techs can export to other countries in a bid to maintain AI leadership. The new AI chip export rules create three country tiers.

Tier one comprises 18 countries that are exempted from AI chip exports. Tier two comprises 120 other countries that will face limits while tier three comprises countries that are barred from accessing US AI technologies.

New Controls

In addition to blacklisting Chinese companies, the US Department of Commerce has moved to tighten controls on the flow of US AI chips to China. The controls are aimed at preventing the diversion of the chips to Huawei.

The latest rules announced by the US government outline additional controls for manufacturers and packaging entities that seek to export chips. The additional controls build on measures that the government introduced earlier to keep China from accessing AI chips that may help its military.

Under the new controls, the US has also tightened restrictions on the DRAM, a type of memory that’s used to make high bandwidth memory. DRAM is used in AI processors. Restrictions on DRAM are likely to impact technology and products sold to China’s memory chip manufacturer, Changxin Memory Technologies.

The new controls apply to chips at 16 or 14-nanometer nodes that meet specific parameters and may be used in AI applications. TSMC and Samsung are among the leading tech companies that will be affected by these controls.

“We are holding foundries accountable for verifying that their chips are not being diverted to restricted entities,” US Commerce Official, Alan Estevez said.

Chip manufacturers can circumvent licensing provisions if they meet specific conditions like partnering with approved designers and trusted chip packaging companies. However, this is subject to due diligence and reporting requirements.