Chinese military manages to bypass US restrictions on Nvidia chips

Despite the US ban, China’s military and government have acquired Nvidia chips. The publicly available tender documents show that dozens of Chinese entities have purchased Nvidia’s A100 and H100 chips, which are widely used in AI applications.
There is image of semi-conductors showing flags of China and USA

Amidst ongoing tensions surrounding trade restrictions, a closer examination of tender documents by Reuters has revealed a nuanced narrative concerning the acquisition of Nvidia semiconductors by Chinese military entities, state-run AI research institutes, and universities. Despite stringent bans imposed by the US on the export of these chips to China, a discerning analysis of publicly available documents exposes the procurement of small batches of Nvidia semiconductors over the past year.

The focus of these purchases includes Nvidia’s A100 and the more powerful H100 chips, both of which faced export restrictions to China and Hong Kong in September 2022. Even the subsequent development of slower A800 and H800 chips by Nvidia for the Chinese market was met with bans in October of the same year.

The significance of Nvidia’s graphic processing units (GPUs) for AI work, recognised for their efficiency in processing large datasets crucial for machine-learning tasks, underscores the continued demand for these chips in China. Despite nascent developments of rival products from companies like Huawei, the Reuters review highlights the lack of viable alternatives for Chinese firms, with Nvidia holding a substantial 90% share of China’s AI chip market before the bans.

The list of purchasers includes elite universities and entities subject to US export restrictions, such as the Harbin Institute of Technology and the University of Electronic Science and Technology of China. Allegations of involvement in military matters or affiliation with military bodies contrary to US national interest have been made against these entities.

An interesting revelation is the emergence of an underground market for banned chips in China. Chinese vendors claim to acquire excess stock through various means, including purchasing from large US firms or importing through companies locally incorporated in places like India, Taiwan, and Singapore.

Nvidia, in response to these developments, emphasises its compliance with all applicable export control laws and expects the same from its customers. The company asserts that any unlawful resale to third parties will be met with immediate and appropriate action. On the US front, authorities have expressed a commitment to closing loopholes in export restrictions and limiting access to chips by units of Chinese companies outside China.

However, experts like Chris Miller, a professor at Tufts University, caution against unrealistic expectations of making export restrictions watertight. The inherent challenge lies in the small and easily smuggled nature of chips.