Wednesday, May 29, 2024

China Acquisition of Recently Banned Nvidia Chips in Super Micro, Dell Servers Raises Concerns

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China Procures Recently Banned Nvidia Chips in Super Micro, Dell Servers, Revealed by Tenders

In defiance of U.S. restrictions, Chinese universities and research institutions have managed to procure high-end Nvidia artificial intelligence chips through resellers, despite the widening ban imposed by the United States last year. A thorough examination of numerous tender documents by Reuters reveals that 10 Chinese entities successfully acquired advanced Nvidia chips integrated into server products manufactured by Super Micro Computer Inc., Dell Technologies Inc., and Taiwan’s Gigabyte Technology Co Ltd following the U.S. expansion of the embargo on November 17.

These tender documents of china, previously undisclosed, highlight the acquisition of servers equipped with some of Nvidia’s most sophisticated chips between November 20 and February 28. While the U.S. prohibits Nvidia and its partners from directly selling advanced chips to China, including through intermediaries, the sale and purchase of these chips within China remain legally permissible.

Remarkably, the sellers of these chips were relatively obscure china retailers, leaving ambiguity regarding whether they utilized pre-existing stockpiles acquired prior to the tightened chip-export restrictions enforced by the U.S. in November. Responding to inquiries by Reuters, Nvidia asserted that the tender specifications pertained to products that were exported and readily available before the imposition of restrictions, thus absolving their partners of any violation of export control regulations.

Similarly, the server manufacturers from china affirmed their compliance with relevant laws or expressed willingness to conduct further investigations into the matter. Notable among the buyers were prestigious institutions such as the Chinese Academy of Sciences, the Shandong Artificial Intelligence Institute, and the Hubei Earthquake Administration, among others. Despite repeated attempts, neither the Chinese buyers nor the retail sellers responded to Reuters’ inquiries regarding the transactions.

Legal experts speculate that Nvidia chips could have found their way into China without the manufacturer’s knowledge, owing to the opacity of downstream supply chains. The U.S. Commerce Department refrained from commenting on potential ongoing investigations but emphasized its commitment to monitoring diversions of restricted chips and investigating credible allegations of violations.

In response to these developments, Nvidia reiterated its adherence to U.S. export control rules, emphasizing the obligation for systems built with its graphic processing units (GPUs) and resold by third parties to comply with these regulations. Super Micro echoed similar sentiments, affirming its compliance with U.S. requirements while pledging to investigate any potential breaches by third-party exporters.

The transactions, although limited in scope, underscore China’s ongoing access to advanced chips with implications for military applications, despite U.S. concerns about the proliferation of such technology. While the full extent of these transactions remains undisclosed, they serve as a sobering reminder of the challenges posed by the underground trade in advanced technology and the complexities of enforcing export control regulations on a global scale.

These revelations shed light on a broader issue surrounding the enforcement of export control regulations and the proliferation of sensitive technologies in global markets. Despite concerted efforts by the U.S. and other countries to restrict the sale of advanced chips to certain entities, loopholes and opaque supply chains continue to pose challenges to effective regulation.

The ability of Chinese entities to procure banned Nvidia chips through third-party resellers underscores the need for enhanced oversight and enforcement mechanisms to prevent unauthorized exports and diversions. Legal experts caution that without greater transparency and accountability in supply chains, such incidents are likely to persist, undermining the effectiveness of export control measures.

In light of these developments, policymakers and regulators must prioritize cooperation and information sharing to address the evolving challenges posed by the global trade in sensitive technologies. Multilateral efforts to strengthen export control regimes, enhance transparency in supply chains, and foster greater collaboration between industry stakeholders and government agencies are essential to safeguarding national interests and promoting global stability.

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