Commerce Secretary Gina Raimondo testifies during a hearing of the Senate Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies on Capitol Hill in Washington, DC, U.S., February 1, 2022.

Andrew Harnik | Reuters

As reports continue that the U.S. may restrict semiconductor exports to China, a small division within the sprawling Commerce Department is making a big difference.

In 2021, Commerce Secretary Gina Raimondo described the Bureau of Industry and Security as a “small but mighty” agency at the center of the federal national security effort. That’s especially true now that President Joe Biden is considering tighter controls on the export of powerful artificial intelligence computing chips to the world’s second-largest economy.

The BIS is responsible for enforcing the U.S. export control system that prevents critical high-tech and defense products from falling into the wrong hands of companies or governments. Decisions made by BIS about who can or cannot get access to U.S. technology can have a significant impact on corporate profits.

Chipmakers have already been hit by restrictions imposed by the BIS. In 2022, BIS warned Nvidia that new licensing requirements barred the company from exporting advanced A100 and H100 chips to China without a Commerce Department license, part of a broader effort by the Biden administration to curb China’s technological advances.

Nvidia It warned in August 2022 that it would lose about $400 million in potential sales in China unless customers bought “alternative products.” Just a few months later, Nvidia began offering a stripped-down version of its flagship artificial intelligence chip for the Chinese market. Its low-end specifications, known as the A800, exempt it from Commerce Department licensing requirements.

But the Wall Street Journal reported Wednesday that even weaker Nvidia products could be restricted from export under President Biden’s direction. The BIS declined to comment on the possible tightening of export controls. Nvidia shares, which have soared 180% this year on artificial intelligence hype, fell 2% after the Wall Street Journal report.

Through its Commerce Control List, BIS can define which product specifications require a license to be sold overseas. These standards can be so specific that only a few commercial products apply.

While the control list is not intended to single out any one vendor, few companies have developed the high-octane processors that power AI models.Nvidia and AMD Lead the group.

If export restrictions are imposed, the companies will be responsible for ensuring that their high-tech processors do not end up in the Chinese market.

In High-Profile Enforcement Case, BIS Targets Hard Drive Maker seagate After Huawei was blacklisted in 2020, the company decided to continue supplying Huawei. seagate was fined $300 million by the government. But the financial impact is far greater, as Seagate has a $1.1 billion business in China.

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