Chinese military, state-owned companies bought tons of high-end NVIDIA AI GPUs despite ban

Chinese military bodies, state-affiliated artificial intelligence research institutes, and universities have managed to circumvent US export bans by purchasing restricted NVIDIA GPUs over the past year, as reported by Reuters based on an analysis of tender documents.

The review of tender documents reveals that various Chinese entities, including elite universities and those subject to US export restrictions such as the Harbin Institute of Technology and the University of Electronic Science and Technology of China, have procured small quantities of NVIDIA semiconductors prohibited for export to China by the United States.

The purchases include NVIDIA’s A100, H100, A800, and H800 chips, all impacted by US export bans implemented in the last two years.

Despite the export bans imposed by the US, the sales have underscored the challenges faced by Washington in completely severing China’s access to advanced US chips crucial for developments in AI and sophisticated military computers.

The demand for NVIDIA chips continues due to their reputation for superior performance in AI work, efficiently processing large amounts of data essential for machine learning tasks.

The Reuters review found that the suppliers were largely unknown Chinese entities, distinct from NVIDIA or its approved retailers. The sales include transactions involving entities accused of involvement in military matters or having affiliations with military bodies, contrary to US national interests.

The purchases also highlight the absence of viable alternatives for Chinese firms, despite emerging rival products from companies like Huawei. Before the bans, NVIDIA held a dominant 90 per cent share in China’s AI chip market.

The tender documents reviewed by Reuters, encompassing over 100 tenders, revealed purchases of A100 chips by various state entities, with dozens of tenders indicating acquisitions of the A800 since the US export ban in October.

Notably, an underground market for these banned chips has emerged in China following US restrictions. Chinese vendors claim to acquire excess stock that reaches the market after NVIDIA supplies large quantities to major US companies or through imports facilitated by companies incorporated locally in places like India, Taiwan, and Singapore.

While NVIDIA asserts compliance with all applicable export control laws, the company spokesperson mentioned that if any customer is found to have made an unlawful resale to third parties, appropriate action will be taken. The US Department of Commerce declined to comment on the situation.

Experts, including Chris Miller from Tufts University, acknowledge the challenges in creating watertight export restrictions for chips, given their small size and the potential for smuggling. The primary objective appears to be disrupting China’s AI development by impeding the construction of large clusters of advanced chips capable of training AI systems.

The Reuters review includes tenders from various entities, revealing purchases of NVIDIA chips for AI applications, although the quantities are generally small. For instance, Tsinghua University, often regarded as China’s MIT, has procured around 80 A100 chips since the 2022 ban.

Despite the small quantities involved, the tenders indicate continued demand for NVIDIA chips in China, raising questions about the efficacy of US efforts to restrict access to these advanced semiconductors.