US Ban Backfires: How Nvidia Chips Find Their Way to China’s Doorstep

It has come to light that Nvidia’s artificial intelligence (AI) semiconductors, which have been prohibited from export to China by the United States, have made their way into Chinese universities and military entities.

According to Reuters, an analysis of publicly released tender documents in China revealed that 10 Chinese suppliers had smuggled Nvidia’s A100·H100 and A800·H800 AI semiconductors. Despite the US government’s ban, these semiconductors were purchased by prestigious Chinese institutions such as Tsinghua University and the People’s Liberation Army.

The US government designated Nvidia’s AI semiconductors A100·H100 and A800·H800 as strategic assets, leading to export bans in August 2022 and October of the previous year.

Tsinghua University in China, for instance, acquired over 80 A100 semiconductors even after the export ban was imposed. The Harbin Institute of Technology, which had close ties with the Chinese military and was sanctioned by the US government, purchased six A100 semiconductors in May of the previous year to train deep learning models. It was also discovered that Nvidia’s banned semiconductors were purchased by the Chinese Academy of Electronic and Information Technology and the People’s Liberation Army.

Chinese universities specifically outlined requirements when bidding for Nvidia semiconductors. For example, Chongqing University specified in a bidding process for one A100 semiconductor that it must be a new product, not a used one. It was confirmed that Chongqing University received its AI semiconductors earlier this month.

It is unclear how Chinese suppliers imported Nvidia semiconductors. However, it has been suggested that they may have bought excess stock that came to the market after Nvidia shipped in bulk to American corporations or imported through domestic companies that established local corporations in countries such as India, Taiwan, and Singapore. 

Reuters noted that Nvidia semiconductor smugglers have emerged in China following the US export control measures. The report also highlighted that the persistent demand for and access to Nvidia semiconductors in China indicates a shortage of alternatives despite domestic companies like Huawei developing their semiconductors. Before the export control measures, Nvidia dominated 90% of the Chinese AI semiconductor market.

A spokesperson for Nvidia conveyed their compliance with export control laws, stating they expect the same from their customers. They added that if it’s discovered a customer has illegally resold products to a third party, immediate and appropriate action will be taken.

However, Nvidia semiconductors being diverted to China indicates a breach in the U.S.’s prohibition on semiconductor exports. Chris Miller, a professor at Tufts University in the U.S., highlighted the challenge, noting the small size of chips and the ease with which they can be smuggled, making it unrealistic to expect the U.S.’s export regulations to be entirely foolproof.