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China buys Nvidia chips to circumvent U.S. sanctions

China buys Nvidia chips to circumvent U.S. sanctions China buys Nvidia chips to circumvent U.S. sanctions (Getty Images)
Author: Maria Kholina

Chinese military, state research institutes of artificial intelligence, and universities continue to procure Nvidia A100 and H100 semiconductors, which the United States has banned for export to China, Reuters reports.

Sales mostly through obscure Chinese suppliers highlight the challenges faced by the U.S., despite its prohibitions aimed at completely cutting off China's access to advanced American chips that could contribute to breakthroughs in artificial intelligence and sophisticated computers for its military.

The purchase or sale of high-end American chips is not illegal in China, and publicly available tender documents show that dozens of Chinese companies have bought and received Nvidia semiconductors since the restrictions were imposed.

These include the A100 and the more powerful H100 chips, the export of which to China and Hong Kong was banned in September 2022, as well as the less powerful A800 and H800 chips, which Nvidia developed for the Chinese market but were also prohibited in October of last year.

Reuters emphasizes that the constant demand for banned Nvidia chips and access to them also underscores the lack of viable alternatives for Chinese firms, despite the emergence of competitive products from Huawei and others. Before the Nvidia ban, the company held a 90% share of the Chinese market for artificial intelligence microchips.

Among the buyers were elite universities and two organizations subject to U.S. export restrictions - the Harbin Institute of Technology and the University of Electronic Science and Technology of China, which were accused of involvement in military affairs or ties to a military agency, contradicting U.S. national interests.

The first acquired six Nvidia A100 chips in May for training an AI model. The second company purchased one A100 in December 2022, with its purpose remaining unidentified.

Neither Nvidia nor the company-approved retailers were among the identified suppliers.

However, an underground market for such chips emerged in China after the introduction of restrictions in the U.S. Chinese suppliers previously claimed to acquire excess inventory that enters the market after Nvidia ships large batches to major American companies or imports through companies registered in countries like India, Taiwan, and Singapore.

Reuters reached out for comments to the 10 suppliers listed in the tender documentation, but none of them responded.