Washington is converting a year of one-off warning letters to chipmakers into binding regulation, timed to land weeks before the US-China truce that has kept the chip war on expires.
The Commerce Department is rolling out a package of rules this week that takes restrictions it had previously handed down company by company, in private letters, and writes them into the Export Administration Regulations for everyone. The move formalizes limits on selling chipmaking tools capable of producing logic chips at 14 nanometers or finer, and tightens the licensing path for advanced AI and supercomputing chips bound for China. It lands just over a month before the one-year truce struck at the October 2025 APEC summit in Gyeongju, South Korea, runs out on November 9.
You don't normally see a government spend a year enforcing a policy through private correspondence and then turn around and codify it. But that's roughly what happened here. In April, Commerce sent individual letters to KLA, Lam Research and Applied Materials ordering them to stop shipping certain tools to Hua Hong, China's second-largest chip foundry, and its Huali Microelectronics subsidiary. The targets were specific: Hua Hong's Fab 6 in Shanghai, which runs 28 and 22 nanometer lines, and a second site, Fab 8a, that doesn't even appear on the company's own website. US officials suspected Huali was pushing toward a 7 nanometer process there, with Huawei reportedly lined up to shift some of its AI chip production to the site once it's running. Those letters applied to three companies. This week's rule applies to every equipment maker that sells into China, whether Commerce ever wrote them a letter or not.
The same pattern played out with chips themselves. Nvidia and AMD received letters earlier this year instructing them to stop shipping certain AI computing chips to China without a license. Codifying that guidance turns a warning aimed at two companies into a standing requirement for the whole industry, and it expands the foreign direct product rule, the mechanism that lets Washington reach foreign-made chips and tools if they contain enough US technology, to catch more Chinese entities than before.
The timing only makes sense against the truce it precedes. At the Gyeongju summit, the US agreed to suspend its "50% Rule," which would have extended export blacklisting to any company at least half-owned by an entity already on the list, for one year starting November 10, 2025. China, in turn, deferred its own export controls on rare earths and critical minerals, including gallium, germanium, antimony and graphite, items where it controls somewhere between 60% and 90% of global supply depending on the material. Both sides agreed to , not settle, their underlying fight. Now that is close to running out, and each government is visibly getting its instruments back in order before it does.
Washington tightens the chip loophole around Nvidia’s AI boom The Commerce Department has clarified that advanced AI chip export licenses apply to China-headquartered companies even when their overseas subsidiaries are the buyers. The move tightens a loophole around Nvidia’s Blackwell and Rubin systems and puts more compliance pressure on AI data center projects outside China. - how to buy Nvidia chips as foreign company - US export controls on advanced AI semiconductor sales
Here's the part that doesn't add up cleanly, though. This same administration spent much of 2026 easing the very restrictions it's now locking into law. It approved Nvidia's H200 chip for export to China on the condition that the US government collect 25% of the proceeds, a structure former officials criticized at the time as trading away a national security tool for revenue. It suspended the 50% Rule as part of the truce. Codifying the equipment and chip letters now reads less like a sudden crackdown and more like Washington hedging its bets: keep the door open for trade talks, but have the stricter rulebook ready to go the moment November 9 passes without a deal.
Nvidia, meanwhile, is dealing with a problem no license requirement has solved. The Financial Times reported that more than $1 billion worth of its AI chips, including B200, H100 and H200 models, were smuggled into China in the three months after the administration tightened export controls this year. Resellers in Guangdong, Zhejiang and Anhui provinces are reportedly selling the banned processors openly to AI data centers, and a repair industry has sprung up in Shenzhen that reportedly services as many as 500 of the chips a month. Some buyers are said to be sourcing hardware through Southeast Asian markets, including Thailand, rather than bringing chips into China directly. None of that activity touches the equipment rule Commerce is finalizing this week, which targets the machines that make chips, not the chips themselves, but it's the backdrop against which lawmakers are now scrutinizing whether Nvidia's chips are ending up in Chinese hands by design or by leakage.
Frankly, the chip war was never going to be settled by a one-year truce, and nobody in Washington seems to think it was. What this week's rule actually does is remove the ambiguity of letters that applied to three or four companies and replace it with something every equipment maker and chip designer has to plan around, truce or no truce. For KLA, Lam Research and Applied Materials, that means China revenue that was already uncertain just got a formal ceiling. For Nvidia, it means the license regime tightens on paper at the exact moment its chips are reportedly moving around it in practice.
Also read: Chip stocks sink into a correction even as Samsung posts record profit • SpaceX moves to buy nationwide low-band spectrum to rival US carriers • TSMC's September Sales Jumped 54.6% as AI Chip Orders Keep Piling Up
This article is posted in Technology News, check it out for more related stories.
Nvidia's restricted AI chips are selling at 2x to 3x US prices on China's gray market, with B200 racks at 50% premiums and over $1 billion smuggled in a single quarter. Jensen Huang has called US export controls "largely backfired" as Nvidia fell from 95% to zero China market share, while Huawei credited the bans for accelerating China's domestic... - nvidia banned chips black market price - export controls china ai accelerator market
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