On Tuesday, the Trump administration made a significant move by adding 80 companies and organizations to a list that restricts them from purchasing American technology and other exports due to concerns over national security. This decision mainly focused on Chinese firms that have been major customers of American chip giants like Nvidia, Intel, and AMD. The administration also aimed to address loopholes that officials have criticized for allowing Chinese companies to progress technologically despite U.S. restrictions.
One notable company newly restricted, Nettrix Information Industry, became the subject of a 2024 investigation by The New York Times. The investigation highlighted how some Chinese executives had managed to bypass U.S. restrictions designed to prevent China from accessing advanced chips for artificial intelligence development.
Nettrix is recognized as one of China’s largest manufacturers of computer servers utilized in AI production. The company originated from former executives of Sugon, an enterprise that previously provided advanced computing solutions to the Chinese military and developed a system used by the Chinese government for surveillance of persecuted minorities in Xinjiang.
In 2019, Sugon found itself on the United States’ “entity list,” which limited its access to American exports over national security fears. The Times uncovered that just six months after the restrictions, Sugon’s former executives established Nettrix, leveraging Sugon’s technology and picking up its customer base. It was also discovered that Nettrix’s owners operated from the same complex in eastern China as Sugon and affiliated companies.
Following Sugon’s inclusion on the restricted list, long-time U.S. partners like Nvidia, Intel, and Microsoft quickly allied with Nettrix, as per the investigation. WireScreen, a business intelligence platform, provided records that revealed connections between Sugon and Nettrix with the Chinese Academy of Sciences, which is deeply involved in chip technology development and has parts under U.S. sanctions for security reasons. Procurement records showed Nettrix had provided servers to universities with defense labs and cybersecurity firms collaborating with the military and on China’s Great Firewall, among other clients.
The Trump administration didn’t stop with China; it also added 54 companies and organizations from China and over two dozen from countries like Iran, Pakistan, South Africa, the United Arab Emirates, and Taiwan to the list. These entities were flagged for their role in advancing Pakistani nuclear and missile programs, furthering China’s quantum and hypersonic weapons development, and attempting to bypass U.S. controls on Iran, among other activities.
In a statement, Howard Lutnick, the commerce secretary, declared, “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives.” Furthermore, the Trump administration expanded sanctions on several subsidiaries of Inspur Group, a significant customer of Intel and other U.S. firms. These entities reportedly supported efforts to develop supercomputers for the Chinese military and sought U.S. technology for this purpose.
Although the Biden administration added Inspur’s parent company to the entity list in 2023, U.S. companies briefly resumed business with Inspur subsidiaries. Inspur Group had even relocated its registered office a mile from the parent group in 2023.
Trade analysts point out that U.S. entity listings can be relatively easy for companies to circumvent, as they are essentially bound to specific names and addresses. The new listings, however, are anticipated to impact a significant part of the Chinese server market, crucial for AI development. Moreover, the Trump administration enhanced the restrictions with a special designation to enforce penalties globally, preventing companies from skirting U.S. laws through exports from other countries.
Initially established during the Clinton administration to block adversaries from developing weapons of mass destruction, the entity list has been more aggressively utilized by recent presidents. Among other groups newly added to the list is the Beijing Academy of Artificial Intelligence, implicated for attempts to acquire AI models and chips to support China’s military modernization.
