Bill that would mandate AI chip location tracking gains industry support

A group of companies that specialize in tracking international shipments of sensitive technologies are backing a Capitol Hill bill that would require America’s most powerful AI chips to incorporate stronger security mechanisms aimed at preventing the chips from reaching China and other adversaries.

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The letter, signed by six companies, says that the Chips Security Act (CSA) would increase the competitiveness of American chip companies while closing key loopholes in the U.S.’ export control regime. The move clashes with claims from semiconductor lobbying groups that the requirements would constrain America’s booming chip industry.

Sent to Congressional leadership Thursday morning and seen by NBC News, the dispatch instead argues that more robust security verification would provide chip customers and manufacturers with assurance they are abiding by sensitive restrictions on chip sales. The companies argue this boosted confidence will “lead to increased sales, faster export approvals, larger transactions, greater access to new markets, and more expansive chip deals.”

Despite U.S. export control laws banning sales of advanced AI chips to certain countries including China, loopholes in current requirements have allowed billions of dollars worth of America’s best AI chips to be sold to entities in third-party countries that can then forward the chips to China. In just one case from March, the Justice Department charged three individuals with conspiring to forward $2.5 billion of AI chips to China.

The CSA aims to address those loopholes, mandating that chip exporters enable better tracking of where advanced chips are sent, either via bespoke location-verification hardware or software that can run on existing hardware. This, bill proponents claim, would ensure that sensitive chips can be sold to countries like Malaysia or Indonesia without fear of further transfer to China.

The bill has been percolating in Washington for several months, as a variety of interest groups duke out the bill’s impact on America’s AI lead. Proponents and China hawks view the bill as a clear-cut way to address a critical national security failure, while certain industry groups have worried that it would hamper American sales abroad — something that the companies in Thursday’s letter vehemently contest.

The House Foreign Affairs Committee unanimously approved the CSA in a 42-0 vote in late March, sending the bill to the wider House where it remains under review. The Senate’s companion legislation remains in the first stages of consideration.

The U.S. has enacted export controls to prevent its most coveted chips from being sent to adversarial countries. Because chips perform the advanced computations required for frontier AI systems, experts say that cutting off access to these chips is crucial to prevent geopolitical rivals from using AI systems for military or economic purposes.

China’s military has embraced AI , and Chinese AI companies like DeepSeek and Tencent have developed general AI systems that lag American companies’ AI capabilities by a matter of months . Chinese AI companies have often claimed that their lack of chips is the primary barrier to develop better systems— a sign that America’s export control system has worked to some extent.

Chip smuggling or diversion could eliminate this bottleneck, which many experts say is a critical national security bulwark. In an April hearing, Select Committee on China Chairman John Moolenaar said: “Chinese companies are buying what they legally can under existing export control regimes and stealing what they cannot.”

Other lawmakers in Washington have been reluctant to allow wider sales of American chips abroad given concerns about China-owned subsidiaries diverting chips to China.

Some semiconductor companies have opposed the bill, saying it would unduly restrict their ability to sell chips abroad. The Semiconductor Industry Association, which represents leading chip companies like Nvidia and AMD, strongly opposes the CSA , arguing that “complex, costly, and unproven security features risks undermining global trust in American semiconductor technologies.” Nvidia announced in December that it has developed technology that could fulfill some of the CSA’s requirements, as Reuters first reported .

GeoComply, one of the companies that signed Thursday’s letter, said that better location verification was a straightforward win for American security and industry. The company works with companies like Amazon Prime Video, Fanduel and the BBC to ensure their services are only sold or offered in approved geographies.

“Chip smuggling is actively eroding the export controls by putting advanced AI chips in the hands of our strategic competitors,” said Kip Levin, GeoComply CEO. Location-verification technology “to confirm that chips remain with authorized users, in authorized locations, gives legitimate buyers a way to prove compliance and gives policymakers the confidence to approve larger deals and broader exports,” Levin said.

GeoComply and the other companies that signed Thursday’s letter, including Multibeam and Fortaegis, likely stand to benefit from added security-verification requirements, though the letter claims the added specifications are “technically feasible” and “strategically necessary.”

At the end of May, the Commerce Department’s Bureau of Industry and Security (BIS) announced that it was closing a potential loophole that had allowed companies to circumvent prohibitions on sales of advanced AI chips to China for the past year by selling the chips to subsidiaries of Chinese companies located in third-party countries — a potentially critical gap in the export-control approach.

In response, Sen. Jim Banks, R-Indiana, and Andy Kim, D-N.J. sent a letter to BIS leadership last week asking the office to address the issue and clamp down on Chinese subsidiaries’ ability to order advanced chips.

“It’s very clear that there’s a significant problem about diversion of chips to China,” said Chris McGuire, a senior fellow at the Council on Foreign Relations who focuses on emerging technologies. “If there are technical measures that can be helpful, we should be implementing them.”