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Days before demitting office, the Joe Biden administration has released an expansive regulatory framework on the export of artificial intelligence (AI) hardware such as graphics processing units (GPUs), which could have far-reaching consequences for India’s AI ambitions.

Three-Tier Framework for AI Hardware Export Restrictions

• Tier 1: Closest US Allies
  • Countries: Australia, Belgium, Canada, South Korea, UK, etc.
  • No restrictions on computing power deployment.
  • Minimal security requirements.
  • Impact: Free access to AI technology for these nations.
• Tier 2: Majority of Countries (Including India)
  • Countries: India, Brazil, South Africa, etc.
  • Restrictions: Limited to importing approximately 50,000 advanced AI chips (around $1 billion) through 2027.
  • Potential to Double Cap: If countries sign agreements to uphold strict security standards.
  • Impact on India:
    • Short-Term: Likely to fulfill current demand for 10,000 GPUs for the IndiaAI Mission.
    • Long-Term: Challenges in scaling AI infrastructure, with possible delays in large AI data centers and difficulty acquiring large-scale GPUs.
• Tier 3: Countries of Concern (Restricted Nations)
  • Countries: Russia, China, North Korea, Iran, etc.
  • No Access to US AI Technology: Nearly total prohibition of AI tech exports.

Special Provisions for India and China

• General Validated End User (GVEU) status for India and China:
  • India: Authorisation for civilian and military use, excluding nuclear applications.
  • China: Only civilian use permitted under similar conditions.

Why the US Imposed These Restrictions?

• National Security: Prevent adversaries (China, Iran, Russia) from acquiring advanced AI technologies.
• US Technological Leadership: To protect US AI leadership and prevent loss of competitive edge.
• Trusted Ecosystem: Build secure and trusted AI environments for allied nations.

Impact on India

• Short-Term:
  • IndiaAI Mission: Current procurement of 10,000 GPUs unlikely to be affected.
  • Subsidized GPUs: Available for startups, academia, and researchers.
• Long-Term Concerns:
  • Licensing Uncertainties: Possible delays in large-scale AI deployments and AI data centers.
  • Impact on Large Firms: Companies like Reliance and Yotta may face challenges scaling up AI compute infrastructure.
  • National AI Mission Challenges: Difficulty in acquiring enough GPUs for large-scale AI projects beyond 2027.
  • Strategic Leverage: US could use AI export restrictions to negotiate trade deals or tariff adjustments.

Nvidia’s Criticism of the AI Diffusion Rules

• Overreach and Bureaucratic: Nvidia criticized the 200+ page regulatory framework as excessive, secretive, and bureaucratic.
• Harming US Competitiveness: Claims that the rules would hinder US innovation and global leadership, weakening the competitiveness of the US semiconductor and software industries.
• Contrast with Trump’s Approach: Praises the earlier Trump administration for fostering AI growth through industry competition without compromising national security.

Enforcement of the Rules

• Regulatory Control: Managed by the US Bureau of Industry and Security (BIS) under the Department of Commerce.
• Technology Access: Ensures AI chips and models do not reach adversaries or nations posing security risks.

Potential Impact on India’s AI Strategy

• AI Hardware Infrastructure: Challenges in large-scale AI hardware deployment.
• Competitive Disadvantage: Potential delays or downsizing of AI data centers could affect India’s competitiveness in AI technology.
• Strategic Partnerships: India may need to secure General National Validated End User authorizations to ensure uninterrupted access to advanced chips.
• AI Market Growth: India’s AI market projected to grow to $17 billion by 2027, with an annual growth rate of 25%-35%.