Is It Too Late for the US to Change Its Chip Strategy Toward China?

Dingding Chen and Runyu Huang

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The competition between the United States and China over artificial intelligence (AI) and semiconductors is often described as a race, but in practice it looks more like a strategic dance, involving a step forward, a step back, and constant recalibration. For several years, Washington moved aggressively to restrict Beijing’s access to cutting-edge chips, hoping to slow China’s advances in AI and high-performance computing. Yet those sanctions carried unintended consequences: they hurt U.S. businesses, accelerated Chinese self-reliance, and encouraged the emergence of alternative supply chains.

Now, Washington is shifting course. The Trump administration this month approved Nvidia’s H20 chip exports to China under a novel revenue-sharing arrangement, requiring the company to remit 15 percent of sales proceeds to the U.S. government. Trump also signaled openness to allowing the export of downgraded versions of Nvidia’s Blackwell.

This pivot reflected a recognition that total bans may have backfired. The new strategy seeks to keep China tethered to U.S. technology, maintaining leverage through selective dependence.

But is this policy shift too late? The answer, it appears, is yes. Chinese companies have already made notable progress toward independence. Beijing is more cautious than ever about relying on U.S. semiconductors, seeing them as potential vectors of vulnerability. While short-term demand for U.S. chips remains strong, the long-term trajectory points toward a fragmented technological future: the emergence of two parallel AI systems to which states and companies around the world will be forced to adapt.

Washington’s Policy Reversal

The United States’ semiconductor strategy has undergone a quiet but meaningful evolution. In 2022 and 2023, sweeping restrictions targeted China’s access to advanced processors such as Nvidia’s A100 and H100, key components for training large AI models. The move was intended to cut China off from the tools needed to dominate AI, but the impact was more complex.