NEW YORK — As Chinese President Xi Jinping is expected to pay a return visit to the United States on the 23rd-25th of next month local time, the Trump administration is moving to rein in China's artificial intelligence. AI core technologies such as Nvidia chips have been Washington's biggest weapon in the U.S.-China trade rivalry, comparable to China's rare earths. The variable is that China has made considerable gains in the meantime in areas such as memory chips and AI models. For President Donald Trump, with little time left before the November 3 midterm elections, a repeat of the empty-handed summit seen during his May 14-15 trip to China would carry a political cost. The mediating role of China, the world's largest crude oil importer, in the Middle East wars is also seen as an agenda item that carries growing weight between the two countries. Above all, this U.S.-China summit is drawing attention because it raises the possibility that Trump may ask Xi to broker U.S.-North Korea talks. It means the United States is no longer in a position to recklessly highlight the U.S.-China conflict by pushing AI controls to the fore as it did before.
U.S. Tells Korea, Others: Join China's AI Camp and Be Cut From Supply Chain
Reuters reported on the 14th local time that the U.S. State Department plans to send letters to 35 countries, including South Korea, notifying them that if they join the China-led AI bloc, they will be excluded from the supply chain that Washington leads. The 35 countries are those that signed the "Joint Statement on the AI Opportunity Partnership" concluded at the 2nd Pax Silica Summit held in Washington, D.C., last June. Reuters said the countries receiving the letter include South Korea, Japan and Australia.
A draft of the letter prepared by the State Department read, "Belonging everywhere is the same as belonging nowhere," and, "Signing the Pax Silica declaration means solidarity and commitment, not a simple membership." Without naming China directly in the letter, the State Department stressed that a country "cannot simultaneously maintain membership in an initiative that conflicts with our expectations." A senior U.S. government official also told Reuters that the letter was written "to make clear that you cannot have it both ways," adding that "if a country claims to be a trusted partner of the United States while joining China's AI initiative, it is doubtful whether that country can be trusted."
Pax Silica is an AI supply-chain body launched under the U.S. State Department's leadership last December. Its name combines Pax, the Latin word for peace, and silica, a semiconductor material. Reuters noted that the U.S. pressure "is read as a strategy to block China from securing resources in the cutting-edge AI competition that will be central to the fight for military and economic supremacy."
China, in fact, established the World AI Cooperation Organization (WAICO) last month along with Russia and others, countering Pax Silica. Notably, Kazakhstan, the only Central Asian country to join Pax Silica, also joined the China-led WAICO, drawing attention. It is one of the so-called "fence-sitting countries" the State Department mentioned in the letter.
The Wall Street Journal reported on the 13th that U.S. Commerce Secretary Howard Lutnick ultimately rejected Apple's request for permission to use Chinese-made memory chips. At the opening ceremony of Apple's advanced manufacturing center in Houston, Texas, that day, Lutnick argued, "It is not desirable for great American companies to use Chinese-made memory chips," and, "There has to be a different solution to the memory chip issue."
Apple, facing management difficulties from the recent surge in memory chip prices, is seriously considering using products from China's CXMT and YMTC as an alternative. Apple is understood to plan to use Chinese-made memory first in products sold in China if it adopts them. According to the Journal, Apple recently expanded the scope of testing for adopting CXMT chips to major product lines such as the iPhone and MacBook. CXMT is a company that also appears on the "Section 1260H List," which the U.S. Defense Department (Department of War) has designated as a firm supporting China's People's Liberation Army. YMTC has been on the Commerce Department's export control list since 2022, so U.S. companies need separate approval to do business with it.
U.S. Tells Apple: Don't Use Chinese Memory; Congress Demands Answers by the 21st
In principle, the purchase of CXMT and YMTC products by U.S. companies is not itself subject to regulation. Apple's review of Chinese purchases is simply a plan that sharply conflicts with the vision of U.S. politicians encouraging domestic semiconductor investment. For this reason, Micron, which recently decided to significantly expand its U.S. production facilities, is understood to have conveyed its position to both the White House and Congress that Apple's use of Chinese memory chips should be opposed. Lingering resentment over Apple's price-cutting bullying when memory chips fell into an oversupply cycle a few years ago also influenced Micron's lobbying.
According to Reuters on the 14th, Apple also developed an AI model exclusively for the Chinese market in cooperation with Alibaba. Unable to install U.S. AI models on its devices in the Chinese market, which accounts for a large share of its revenue, it shifted its strategy to in-house development.
The U.S. Congress has also raised objections to Apple's use of Chinese-made memory chips. Seven senators, including Republican Jim Banks of Indiana and Democrat Chuck Schumer of New York, sent a bipartisan letter to Apple CEO Tim Cook on the 29th of last month, demanding a pledge that chips made by CXMT and YMTC would not be used in any product worldwide. They further asked whether Apple had requested additional supply, larger quotas or priority from U.S. and allied manufacturers, and asked Cook to answer seven items by the 21st, including the possibility that technical information leaked to China during the quality verification process and whether Apple had conducted its own analysis of the risk of Chinese government supply controls. Cook, who has led Apple since 2011, is set to remain in the post only until the end of this month. From the 1st of next month, John Ternus, a senior vice president for engineering with a background as a hardware engineer, will run Apple.
U.S. politicians are especially sensitive to advanced-industry cooperation with China because AI is one area where there is some competitiveness gap between the two countries. If the United States falls behind even in AI competitiveness, its means of pressuring China to maintain economic supremacy would rapidly shrink.
According to Bloomberg on the 14th, Alibaba's open-weight AI model Qwen was downloaded more than 3 billion times worldwide over the past six months. That download count far exceeded Google's 418 million and the 227 million of Meta, Facebook's parent company.
The Financial Times reported on the 19th that China's ByteDance and Tencent each received about 10,000 Nvidia H200 chips in recent weeks. It predicted that several other tech companies could soon secure similar volumes. The United States had initially approved these companies to buy up to 100,000 H200 chips each, but the Chinese government blocked this, saying it would build up its own semiconductor competitiveness. Separately, Hong Kong's South China Morning Post reported on the 17th that large Chinese hedge funds such as Gaoyi Asset, Jinglin Asset and Oriental Harbor Investment reduced their stakes in U.S. hyperscalers and Nvidia in the second quarter and shifted their investments to memory chip makers.
Xi to Visit U.S. on the 23rd-25th of Next Month; Trump May Add Kim Jong-un Summit to Existing Agenda
As the United States stokes the issue of AI competition with China, the market's eyes are now on the summit between the two nations. On this, U.S. political outlet Politico reported on the 17th that Xi is likely to arrive in the United States late at night on the 23rd of next month and meet Trump on the 24th. It predicted that Xi would depart immediately on the 25th of the same month and would not attend the U.N. General Assembly, which runs for a week from the 22nd. Xi last visited New York and addressed the U.N. General Assembly at the ceremony marking the 70th anniversary of the U.N.'s founding in 2015.
If Xi's visit on the 24th is confirmed, it aligns with what Trump has previously mentioned. The expected agenda, as in the May summit, again includes AI, rare earths, soybeans, cryptocurrency, Taiwan and the Middle East. Reuters also reported that a U.S. delegation led by Treasury Secretary Scott Bessent will hold high-level AI-related talks with China next month ahead of the summit. In an interview with U.S. outlet Punchbowl News released on the 7th, Trump stressed, "AI is a field many times bigger than the internet," and, "We don't want to see China dominate cryptocurrency and win in AI." Trump went on to say, "I'll have a great time with President Xi, who is coming to the United States in a few weeks, and I'll discuss these issues," and, "Many people think China is losing to us in AI, so we can't let ourselves lose."
Another point of interest at the coming U.S.-China summit is discussion of resuming U.S.-North Korea talks. Earlier, on the 16th on his social network service Truth Social, Trump abruptly said, "Given that I have a very good relationship with Kim Jong-un, I have long been unhappy that the United States decided to take part in joint military exercises with South Korea," and, "Considering that it is too late to cancel now, I have instructed Defense Secretary Pete Hegseth to sharply reduce the scale of the joint exercises." The remark came on the very day the South Korea-U.S. joint exercise "Ulchi Freedom Shield (UFS)," held from the 17th to the 27th, began. On the 15th, South Korea's Liberation Day, Trump also posted on Truth Social, "Kim Jong-un, the chairman of North Korea's State Affairs Commission, and I get along well," along with a photo taken with Kim at the Joint Security Area (JSA) in Panmunjom on June 30, 2019. In effect, it was a message to Kim about U.S.-North Korea talks.
The Journal offered a more specific report on the 18th that Trump had asked his aides to pursue a plan to hold a summit with Kim as early as this fall. In particular, a plan to meet Kim during an Asia tour tied to the Asia-Pacific Economic Cooperation (APEC) summit held in Shenzhen, China, on November 18-19 was reportedly floated. Trump also pursued a meeting with Kim when he toured Asia around the APEC summit in Gyeongju, North Gyeongsang Province, last year. At that time as well, he intensively coordinated a "surprise summit" with North Korea behind the scenes, but it did not materialize because of the tight schedule. That is why some speculate Trump may ask Xi for a role on the matter.
It is not easy to predict what cards Trump will exchange with China, whose relationship has become vastly different from his first term or from last year. That is because the pressure China would feel simply from the United States restricting AI exports may no longer be large. Rather, the room for China to help Trump on Middle East and East Asia issues has increased considerably. That is all the more true given the November U.S. midterm elections, in which Trump has been cornered by failures in economic and geopolitical responses. Xi may instead raise his voice on the Taiwan issue, and it remains to be seen what results that will bring in connection with security on the Korean Peninsula. And the way the U.S.-China summit unfolds could, of course, roil global financial markets.
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