A group of senators is demanding the suspension of Nvidia’s export licences to export advanced AI chips to China and several South-East Asian countries. The demand came in a formal letter to Commerce Secretary Howard Lutnick from Republican Senator Jim Banks and Senator Elizabeth Warren. They are blaming Jensen Huang’s public assurances, which they say were “potentially misleading.” The backlash has been triggered by a recent major chip smuggling scandal in which Wally Liaw, a co-founder of server manufacturer Supermicro, was indicted last week. Liaw is accused of conspiring with two others to violate US export controls by allegedly shipping large quantities of advanced Nvidia chips to China through third countries, a scheme that senators say exposes catastrophic failures in how American chip exports are being monitored and policed, as per a report by The Financial Times.
What the Senators are demanding
In the letter, Banks and Warren called on the Commerce Department to take “immediate action” to address what they described as the “large-scale diversion of advanced American AI chips to China” via South-East Asia.Both of the specifically urged the suspension, pausing or reconsideration of all active export licences covering advanced Nvidia AI chips and server systems destined for China. Not just that, they also want a ban on selling chips to intermediaries in Malaysia, Thailand, Vietnam, and Singapore. These are the countries that have been identified as transit points in the alleged smuggling operation.“American export controls exist to protect American national security. They only work if the companies subject to them follow the law and meaningfully, aggressively monitor their supply chains,” the senators wrote.
What the Senators said against Jensen Huang’s assurances
The senators’ letter challenges statements made by Nvidia CEO Jensen Huang, who last year actively spoke against US export controls that prevented his company from selling chips to China. Huang claimed that Nvidia’s customers understood that diversion was illegal and, as a result, “monitor themselves very carefully.”Banks and Warren were scathing in their assessment of those assurances. “These statements were not simply wrong in hindsight. They were contradicted by reporting available at the time and potentially misled US officials,” they wrote.The senators also asked Lutnick to specifically investigate whether statements made by Nvidia’s leaders about the absence of chip diversion “were materially false or misleading” and whether those statements had influenced any licence decisions.“The scale of alleged fraud and diversion in south-east Asia among key Nvidia partners raises serious concerns that the company’s compliance and monitoring processes may be grossly inadequate to protect cutting-edge American technology from foreign adversary access,” they added.“American export controls exist to protect American national security. They only work if the companies subject to them follow the law and meaningfully, aggressively monitor their supply chains. We are concerned that the recent Supermicro indictment raises serious questions about Jensen Huang’s public assurances,” they said.
Nvidia responds to call for banning chip exports to China
Nvidia said that compliance with US export regulations was a “top priority” and that it continues to work closely with customers and the government on compliance programmes.The company also pushed back on the idea that smuggled chips benefit anyone in the long run. It said that “unlawful diversion of controlled US computers to China is a losing proposition across the board” because Nvidia does not provide service or support for such systems and that “enforcement mechanisms are rigorous and effective.”
