Michael Kratsios, former acting director of the White House Office of Science and Technology, said the US is considering ways to improve location-tracking in semiconductor chips to prevent sensitive technology from reaching China.

Kratsios said that software and physical changes to chips are being discussed, and these ideas were included in an AI action plan unveiled by Trump officials last month.

Last week, China summoned Nvidia representatives to discuss alleged security risks related to its H20 chips, following recent US efforts on location-tracking.

Trump officials recently said they would lift export restrictions on the H20 to China as part of a trade deal they claim will secure sales of rare-earth magnets to the US.

Kratsios clarified he has not spoken with Nvidia or AMD about the tracking tech, and Nvidia denies having chip backdoors.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Export controls face persistent enforcement gaps despite policy tightening

The push for chip location-tracking reflects ongoing challenges with existing export restrictions that haven’t fully stopped technology flows to China.

Current reports indicate that U.S. chips are still being smuggled into China through third-party countries, undermining existing export controls1. This smuggling problem has created significant gaps in compliance and enforcement of current measures, raising questions about the effectiveness of traditional export control approaches2.

The proposed Chip Security Act specifically aims to address these enforcement weaknesses by requiring exporters to report any diversion or tampering of AI chips, enhancing accountability throughout the semiconductor supply chain1.

The location-tracking approach represents a shift from reactive policy measures to proactive monitoring technology, acknowledging that regulatory frameworks alone haven’t been sufficient to control the flow of sensitive technologies.

2️⃣ China’s massive chip consumption creates monitoring complexity at unprecedented scale

The scale of China’s semiconductor market makes tracking and enforcement particularly challenging for U.S. policymakers.

China imported $260 billion worth of semiconductors in 2017, making it the largest global consumer of chips3. Today, China holds a 30% market share in legacy chips and accounts for 40% of planned global expansion in legacy chip production until 20304.

This enormous market presence means that even small percentages of diverted chips represent significant volumes that could impact national security concerns.