Chinese Institutions Obtain High-End Nvidia Chips Despite US Restrictions
In a move that defies US sanctions, Chinese universities and research institutes have acquired advanced Nvidia artificial intelligence (AI) chips through resellers. A Reuters review of public tender documents revealed that 10 Chinese entities procured Nvidia chips embedded in server products manufactured by Super Micro Computer Inc., Dell Technologies Inc., and Gigabyte Technology Co. Ltd. after the US expanded its embargo in November 2023. According to the previously unreported tenders fulfilled between November 20th, 2023 and February 28th, 2024, the servers contained some of Nvidia’s most sophisticated chips.
While the US prohibits Nvidia and its partners from selling advanced chips to China, including via third parties, the sale and purchase of the chips are not illegal in China. The 11 sellers of the chips were little-known Chinese retailers. Reuters could not determine whether they used stockpiles acquired before the US tightened chip-export restrictions in November 2023 to fulfill the orders.
Contacted by Reuters, Nvidia stated that the tenders specify products that were exported and widely available before the restrictions. “They do not indicate that any of our partners violated the export control rules and are a negligible fraction of the products sold worldwide,” a spokesperson said. The server makers claimed compliance with applicable laws or further investigations.
Among the buyers were prominent Chinese institutions such as the Chinese Academy of Sciences, the Shandong Artificial Intelligence Institute, and various universities. None of the Chinese buyers or retail sellers responded to Reuters’ inquiries regarding the matter.
Experts speculate that Nvidia chips could have been diverted to China without the manufacturer’s knowledge, given the lack of visibility in downstream supply chains. If the manufacturer had conducted sufficient due diligence, “it presumably would be challenging for the US government to pursue an enforcement action,” said Daniel Gerkin, a Washington-based partner at law firm Kirkland & Ellis.
The US Commerce Department declined to comment on potential ongoing investigations but emphasized that its Bureau of Industry and Security monitors diversions of restricted chips, conducts end-use checks, and investigates potential breaches. Officials clarified that they would investigate credible allegations of violations, including through the use of shell companies.
Nvidia stressed that systems built with its graphic processing units (GPUs), which break down computer tasks and process them together, and resold by third parties must comply with US restrictions. “If we determine that any product was subsequently resold in violation of US export control rules, we’ll work with our customers to take appropriate action,” a spokesperson stated.
Super Micro asserted compliance with US requirements on the sale and export of GPU systems to regions and parties that require licenses. “If we become aware that a third party has exported or reexported without the required licenses, we investigate the matter and take appropriate action,” it said. In a letter to Reuters on behalf of Super Micro, US law firm Clare Locke stated that its client “goes above and beyond what US export restrictions require” by proactively ensuring that its customers do not violate the curbs.
Regarding the tenders identifying its products, Super Micro claimed they represent “older generation or general purpose servers not capable of the largest scale AI operations that were available in China prior to the export control regulations.” The awarded suppliers, according to the company, “are not known Supermicro customers.”
A Dell spokesperson reported finding “no evidence of shipping products configured with the restricted chips you listed to the entities you named” but would continue investigating. “Our distributors and resellers are required to comply with all applicable global regulations and export controls. If we become aware of a distributor or reseller that is not complying with these obligations, we take appropriate actions, including termination of our relationship,” the spokesperson explained.
Gigabyte affirmed its adherence to Taiwanese laws and international regulations in an email. It did not respond to subsequent inquiries about tenders identifying its products as a source of banned Nvidia chips. Taiwan’s economy ministry stated that it expected Taiwanese companies to respect US export controls.
Research Benefits and Concerns
The transactions were disclosed in about a dozen tenders found by Reuters on public databases, covering only a fraction of purchases by China’s state entities. However, this limited snapshot suggests that China still has access to advanced chips that US officials believe could aid AI development for military applications, such as modernizing China’s defense forces or developing hypersonic missiles.
Each purchase was limited to several servers and a few dozen restricted chips. Nevertheless, experts believe they could be valuable for training models and conducting advanced research. The tenders, valued between 71,500 yuan and 1.86 million yuan ($10,000 and $259,000), did not specify intended uses.
Under Chinese law, procuring agencies representing state or state-affiliated buyers must confirm that a supplier can fulfill the tender before declaring it the winner and signing a contract. Reuters only analyzed tenders where winners had been announced.
Companies and individuals accused of violating US export controls face potential civil or criminal penalties, including fines reaching hundreds of thousands of dollars and up to 20 years in prison for individuals. Last year, Reuters reported on an underground trade in Nvidia chips in China, most notably at Shenzhen’s Huaqiangbei electronics market in June, before the US expanded its restrictions. Upon a return visit in December, the vendors who had spoken to Reuters months earlier were gone, and other sellers claimed ignorance of their whereabouts.
