The Chip Security Act Explained: Will US Chips Come to Europe With a Tracking Device? - MRKT3.0
Skip to content
AI & Digital Rules, EU AI Regulation & Compliance
The Chip Security Act Explained: Will US Chips Come to Europe With a Tracking Device?
Grace Sharp
July 16, 2026
Takeaways
The Chip Security Act explained in one line: every export-controlled US AI chip would need location verification built in within 180 days of enactment, after clearing committee 42-0 in March 2026.<br>Six tracking-technology firms publicly backed the bill in June, arguing verification would unlock bigger chip deals rather than smaller ones.<br>The bill grew out of a congressional report finding DeepSeek was reportedly built on roughly 60,000 Nvidia chips, many restricted from export to China.
Washington has spent three years deciding which chips China is allowed to have. The Chip Security Act asks a different question entirely: where is every advanced American chip, right now, anywhere in the world?<br>And, if you run a European data centre full of NVIDIA hardware, that question includes you.<br>What Does the Chip Security Act Actually Require?<br>The bill, H.R. 3447 in the House and S.1705 in the Senate , directs the Commerce Department to require chip security mechanisms on export-controlled AI chips within 180 days of enactment . In practice that means location verification built into the hardware, firmware or software of anything classified under the export codes covering advanced AI accelerators.<br>🚨 @SenTomCotton introduced the Chip Security Act to stop China from stealing America's most advanced AI chips. Now six companies are publicly backing it.
China can't build frontier AI without our chips. Smuggling networks are the only thing keeping them in the race. Cotton's… pic.twitter.com/ZWgBR6Ep8D<br>— Juanita Broaddrick (@atensnut) June 19, 2026
The bill leaves the method open, so a software or firmware ping or a delay-based check would qualify, and the text explicitly rules out anything that hinders the chip itself , such as a kill switch or geofencing mechanism.<br>Exporters would also face a mandatory reporting duty . Anyone with credible information that a chip has wandered from its licensed location must tell the Bureau of Industry and Security promptly. Commerce and the Pentagon then get a year to study what else might be bolted on. The latest draft floats "workload verification methods", which would mean reporting on what tasks foreign customers are running on American silicon.<br>Why Is the Chip Security Act Moving Now?<br>The reason behind the Chip Security Act is largely due to smuggling.<br>The bill grew out of the House Select Committee on China’s DeepSeek report, which concluded the company built its models on tens of thousands of restricted NVIDIA chips. The Justice Department has since been indicting alleged smuggling networks accused of routing billions of dollars of hardware into China through Thailand and Malaysia. The House Foreign Affairs Committee vote in March was 42-0.<br>What Does the Chip Industry Say?<br>Supporters have a genuinely decent argument. In June, six verification firms including GeoComply wrote to congressional leadership arguing that tracking makes exports easier, not harder. If Commerce can see where chips are, it can approve larger shipments to more countries with less paranoia. Verified compliance becomes a fast lane, not a leash. Even the Congressional Budget Office prices the enforcement apparatus at a modest $12 million over five years.<br>The chipmakers themselves are not buying it. The Semiconductor Industry Association came out against the bill on 2 March, with president and CEO John Neuffer explaining:<br>“SIA members are fully committed to complying with export controls, and we strongly oppose the illicit diversion and misuse of our chip technologies." He continued that, "while we understand policymakers’ interest in addressing this issue, we cannot support blanket mandates for new, untested, and potentially infeasible on-chip mechanisms, such as what is being proposed in the Chip Security Act."<br>ITI , the broader tech lobby, goes further, adding that a government tracking mandate would deepen the impression of US control over the American AI stack, "pushing the very countries that should be core customers of U.S. providers toward alternatives".<br>What Does the Chip Security Act Mean for Europe?<br>Europe did not vote for the leash either way. European buyers are already asking whether the American AI stack comes with too many strings attached, and Chinese vendors would happily market their chips as tracking-free. For some buyers that pitch will land. A bill written to stop Shenzhen smugglers may end up nudging Rotterdam procurement teams.<br>The timing matters as well. Brussels proposed its own Chips Act 2.0 in June precisely to reduce strategic dependencies, with photonic chips among its named priorities. Dependency on tracked US hardware is exactly the kind of lever the sovereignty argument feeds on, and China’s...