Passed on

China secures AI chips through the back door

China is apparently using a trick to circumvent the US ban on exporting high-performance processors to the People's Republic. According to an analysis of hundreds of delivery documents, ten Chinese companies are said to have purchased servers equipped with the latest generation of special processors optimized for artificial intelligence (AI) from global market leader Nvidia.

According to research by the Reuters news agency, the computers came from US manufacturers such as Super Micro Computer and Dell as well as Taiwanese provider Gigabyte. The buyers are as yet little-known retailers who, according to the documents, are said to have passed the products on to Chinese universities and research institutes. However, it is still unclear whether the devices were purchased before the tightening of US restrictions last November.

The USA prohibits Nvidia and the partners of the world's most valuable chip manufacturer from selling high-performance processors to the People's Republic. This also applies to transactions via third parties. In China itself, however, the purchase and sale of these products is legal.

The aforementioned server manufacturers emphasized that they comply with applicable laws and announced internal investigations. None of the Chinese buyers could be reached for comment.

"Vanishingly small quantities"
When asked, Nvidia stated that the products listed in the delivery documents were generally available before the US embargo. "They do not indicate that any of our partners have violated export control regulations." Furthermore, the quantities involved were negligible.

However, the publicly available documents examined by Reuters only include a fraction of purchases by Chinese state institutions. The identified deliveries each comprised a few servers with several dozen special chips. According to industry experts, they are nevertheless useful for AI training or research.

Sales channels almost impossible to control
According to Daniel Gerkin, partner at law firm Kirkland & Ellis, the chips may have been diverted to China without the manufacturers' knowledge. The sales channels for the products could hardly be controlled. It is therefore difficult for the US government to enforce its ban.

The US Department of Commerce did not wish to comment on any current investigations. However, it pointed out that it was keeping an eye on whether chips were being diverted. Violations of the embargo can result in fines of several hundred thousand dollars and up to 20 years in prison.