Since 2022 the United States has limited which AI chips can be sold to China, and China has answered with rules of its own and a push to make its own chips. What the rules say, how they work, what they have cost, how they are enforced, and the arguments on each side. Start simple, go as deep as you like.
Stuck at any point? Ask an AI about this page →The most powerful AI systems run on a small number of advanced chips, most designed in the United States 1. The US government says these chips can help build weapons and surveillance systems, so it limits their sale to China 1. China has used export rules of its own on minerals that chip-making needs, and says those rules are not bans 2 3.
The first big US rule, in October 2022, aimed to "protect our national security and prevent sensitive technologies with military applications from being acquired by the People's Republic of China's military", in the words of a Commerce Department official 1. A US prosecutor put the stakes more bluntly in 2025: "The country that controls these chips will control AI technology; the country that controls AI technology will control the future" 4.
Controls reach two layers: the finished AI chips and the machines needed to make advanced chips. The 2022 rule required licences for factories in China making logic chips at 16/14 nm or below, advanced memory, and for US persons supporting certain Chinese factories 1. For a primer on why chips matter, see How AI chips work.
The January 2025 AI Diffusion Rule would have let 18 allied countries, including Japan, the UK and Taiwan, buy freely; kept China and other arms-embargoed countries under a presumption of denial; and set quotas for everyone else 7. In May 2025 the new administration rescinded it, promising "a bold, inclusive strategy to American AI technology with trusted foreign countries" 9.
The January 2026 rule allows case-by-case licences to China and Macau for chips below a performance score of 21,000 and memory bandwidth of 6,500 GB/s, as long as the total processing power shipped to China stays at no more than half of what is shipped to US customers for use in the US, and "every shipment" is checked by a third-party lab 10 12. Separately, a 25% import tariff under Section 232, a US national-security trade law, applies to chips such as the H200 and AMD MI325X 11; licensed H200s for China are subject to it when they pass through the US, NVIDIA says 13.
The rules work in three ways:
The performance score is called Total Processing Performance (TPP), and is defined in the rules for chips listed under export category 3A090 10. In 2023 the US added a "performance density" test so that chips just under the headline limit, but packing a lot of performance into a small area, are also caught 5 14.
The "foreign direct product rule" extends US control to foreign-made items built with US technology; in December 2024 it was widened for chip-making equipment and certain blacklisted companies, and a "de minimis" rule now covers some foreign equipment containing any US-made chip 6 15. In May 2025 the US warned that using Chinese advanced chips, naming Huawei's Ascend 910B, 910C and 910D, without authorisation "could result in BIS enforcement actions" 16.
NVIDIA made a special chip for China, the H20, to stay under the limits. In April 2025 the US required a licence for it "for the indefinite future", and NVIDIA took a $4.5 billion charge for chips it could no longer sell 8 17.
NVIDIA also said it could not ship $2.5 billion of H20 orders that quarter and expected to lose about $8.0 billion of sales the next 17. Licences returned in August 2025; US officials "expressed an expectation that the USG will receive 15% or more of the revenue", but NVIDIA recorded only about $60 million of licensed H20 sales 13. NVIDIA's chief executive said in October 2025: "We went from 95% market share to 0%" (press) 18.
NVIDIA's annual report says it was "effectively foreclosed from competing in China's data center compute market" 13. Its August 2026 results say it "is not assuming any Data Center compute revenue from China" 19. H200 licences for specific Chinese customers came in February 2026, with shipments subject to the 25% tariff 13. See our NVIDIA and AMD guides.
China has answered in two ways: rules of its own and a push to make its own chips. It put export licences on gallium and germanium, two metals used in chips, from August 2023, and on rare earths in 2025 2 3; the October 2025 rare-earth measures were suspended for a year in November 2025, a law firm's summary notes 20. Its companies, led by Huawei, supplied about 41% of China's AI accelerator cards in 2025 (analyst estimate, reported by press) 21.
China's commerce ministry says "export control does not prohibit exports, and exports that meet the relevant regulations will be allowed" 2. In September 2025 China's market regulator said a preliminary investigation found NVIDIA had broken competition law in connection with its purchase of Mellanox (press) 22. Reuters reported in November 2025 that new state-funded data centres must use only domestic AI chips; the directive has not been published 23.
The research firm IDC estimated domestic vendors supplied 41% of the roughly 4 million AI accelerator cards sold in China in 2025, against 55% for NVIDIA (analyst estimate, reported by press) 21. That is a whole-year figure; NVIDIA's own statements describe its China data-centre sales falling to almost nothing after the April 2025 licence requirement 8 18. China's third national chip fund, Big Fund III, has 344 billion yuan of registered capital (press) 24. China's leading chip factory, SMIC, reported June-quarter 2026 revenue of $3.0 billion, up 36% 25; TechInsights says its newest process is "a scaled evolution of its 7nm-class technology" (analyst) 26. Cambricon's first-half 2026 revenue roughly doubled to 6.0 billion yuan (press) 27, and Baidu plans to list its Kunlunxin chip unit in Hong Kong 28. See our Huawei Ascend guide.
Rules invite smuggling. In December 2025 the US Justice Department announced it had shut down a network that tried to export about $160 million of NVIDIA H100 and H200 chips to China, seizing more than $50 million in chips and cash 4.
Other US cases include two people charged in August 2025 with shipping AI chips to China through Singapore and Malaysia 29, and a March 2026 case in which the accused allegedly ordered 750 servers worth about $170 million through fake Thailand-based buyers; the deals did not go through 30. In Singapore, three people were charged in February 2025 over server shipments suspected of going to China (press) 31.
Transit countries have tightened too. Since 14 July 2025 Malaysia has required a Strategic Trade Permit for "all exports, tranships and transits of high-performance AI chips of US origin", with 30 days' notice 32. The January 2026 US rule requires third-party testing of every licensed shipment to China 10.
The Netherlands, home of the chip-machine maker ASML, has its own licences for advanced chip-making equipment; its minister said: "We believe it is important to maintain control over who gains possession of what technology" 33. Malaysia requires permits for US AI chips passing through 32.
India: the 2025 AI Diffusion Rule did not name India; like most countries it would have faced quotas rather than free access, until the rule was cancelled 7 9. In February 2025 India and the US launched the TRUST initiative covering AI and semiconductors, pledging to "redouble efforts to address export controls" 34. A US–India AI Opportunity Partnership followed in February 2026 35.
The Dutch rules tightened again from April 2025, adding certain measuring and inspection equipment; licences are case by case, not a ban 33. For India's own chip plants see our India's semiconductor push guide.
Supporters say the rules slow China's military AI and keep the US ahead 1 5. Critics say they cost US companies sales and push China to build its own industry faster 13 21. The evidence below is what each side points to.
Evidence often cited by critics: NVIDIA's China share falling to near zero by its own chief executive's account (press) 18, and domestic vendors' 41% share (analyst) 21. Evidence often cited by supporters: China's leading factory remains at a 7 nm-class process (analyst) 26, One fact is cited by both sides: DeepSeek trained its V3 model on 2,048 NVIDIA H800 chips, showing both how far efficient software can go and how much Chinese labs relied on US chips 36. In 2026 DeepSeek said its V4 model can run on Huawei chips, and Huawei said its chips were used in some of V4's training (press) 37.
Policy has swung between tightening (2022–2025) and case-by-case licensing with a tariff (2026) 12 11. The payment arrangement of August 2025 raised legal questions: "It is unclear under what executive authority the unprecedented payment agreement was forged," NPR reported 38. Think tanks disagree on whether allowing H200 sales helps or harms US interests; one view is set out by the Council on Foreign Relations 39.
39 sources, all checked September 2026. Official = the company or organisation’s own page; Filing = a document filed with a regulator or an annual report; Standard = a published industry standard; Paper = a peer-reviewed or conference paper; Research = an independent research body; Government = a government page; Press = news coverage, used only where no official source exists.
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