Chinese Underground Network Smuggles Banned Nvidia AI Chips Despite US Restrictions

Underground network smuggling Nvidia AI GPUs into China despite US export ban: An investigation has uncovered over 70 sellers who claim to receive dozens of advanced Nvidia chips each month and resell them in China, circumventing US efforts to restrict exports of these chips.

• The chips, including Nvidia A100 and H100 GPUs, are brought into China by couriers from countries like Singapore that can legally obtain them, with one Chinese student reportedly paid about $100 per GPU to transport six A100s in November.
• Some resellers openly operate out of brick-and-mortar electronics shops in China, such as the Huaquiangbei market in Shenzhen, highlighting the difficulty of enforcing US rules once the chips leave US borders.
• Nvidia maintains it is fully complying with export restrictions, stating, “We apply the same standard to all transactions, large or small, and expect our partners to do the same.”

Broader implications and challenges of enforcing chip export restrictions: The underground smuggling network reveals the inherent challenges in actually stopping restricted chips from reaching China despite US efforts.

• The US has been trying to block advanced Nvidia GPUs like the 4090, A100 and H100 from being exported to China since 2022, aiming to maintain leadership in cutting-edge processors.
• However, once the chips are legally sold to other countries, the US has limited ability to control their ultimate destination, with small-scale smugglers and resellers able to quietly move them into China.
• Even some large Chinese tech firms like ByteDance, Tencent and Alibaba are finding ways around the restrictions, such as renting Nvidia’s chips through US-based Oracle to access them while complying with the letter of the law.

The thriving underground market for Nvidia’s high-end AI chips in China underscores the difficulties of implementing effective export controls in a globalized technology sector. While the US aims to maintain a competitive edge, determined actors are still finding ways to access this critical technology. The cat-and-mouse game is likely to continue as the US and China jostle for leadership in cutting-edge semiconductors and artificial intelligence.