China acquires recently banned Nvidia chips in Super Micro, Dell servers, tender shows

China acquires recently banned Nvidia chips in Super Micro, Dell servers, tender shows

Chinese universities and research institutes have recently acquired high-end Nvidia artificial intelligence chips through resellers, despite the US expanding a ban last year on the sale of such technology to China.

A Reuters review of hundreds of tender documents showed 10 Chinese entities acquired advanced Nvidia chips embedded in server products made by Super Micro Computer Inc, Dell Technologies Inc and Taiwan’s Gigabyte Technology Co Ltd after the US on November 17 expanded sanctions to impose more chips and countries to licensing regulations.

In particular, the server contains some of Nvidia’s most advanced chips, according to a previously unreported tender that was filled between November 20 and February 28. While the US bars Nvidia and its partners from selling advanced chips to China, including through third parties, those sales and purchases of the chips are not illegal in China.

The 11 chip sellers are little-known Chinese retailers. Reuters could not determine whether, in fulfilling the order, they used savings gained before the US tightened chip export restrictions in November.

Contacted by Reuters, Nvidia said the tender specified products that were exported and widely available before the sanctions. “They have not shown that any of our partners are in breach of export control regulations and are a small proportion of the products sold worldwide,” a spokesman said.

The server makers say they are complying with applicable laws or will investigate further.

Among the buyers are the Chinese Academy of Sciences, the Shandong Institute of Artificial Intelligence, the Hubei Earthquake Administration, Shandong and Southwest universities, a technology investment firm owned by the Heilongjiang provincial government, a state-run aviation research center and a space science center. .

one of China’s buyers and sellers answered questions from Reuters on the matter.

Daniel Gerkin, a Washington-based partner at law firm Kirkland & Ellis, said Nvidia chips could be moved to China without the manufacturer’s knowledge, given the lack of visibility into the downstream supply chain.

If the manufacturer has done adequate due diligence, “it may be challenging for the U.S. government to pursue enforcement action,” he said.

The US Commerce Department told Reuters it could not comment on any possible ongoing investigation, but said its Bureau of Industry and Security was monitoring the removal of restricted chips, conducting end-use inspections and examining potential violations.

Officials will investigate allegations of credible violations, including through the use of shell companies, a spokeswoman said.

Nvidia said systems built with graphics processing units (GPUs) – chips that break a computer’s tasks into smaller pieces and process them together – and resold by third parties must comply with US restrictions.

“If we determine that any products are subsequently resold in violation of US export control regulations, we will work with our customers to take appropriate action,” the spokesperson said.

Super Micro says it complies with US requirements regarding the sale and export of GPU systems to territories and parties that require a license.

“If we realize that a third party has exported or re-exported without the required license, we investigate the matter and take appropriate action,” he said.

In a letter to Reuters on behalf of Super Micro, US law firm Clare Locke said its client “went above and beyond US export restrictions” by proactively taking steps to ensure its clients did not run afoul of the restrictions.

In relation to the tender identifying its products, Super Micro said it represented “old-generation or general-purpose servers that were not capable of the largest-scale AI operations available in China prior to export control regulations”. The awarded supplier “is not a known customer of Supermicro”, the company said.

A Dell spokesperson said the company “found no evidence of shipping products configured with the restricted chips you listed to the entity you named”, but it would continue to investigate.

“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 who is not complying with these obligations, we take appropriate action, including termination of our relationship,” the spokesperson said.

Gigabyte said in an email that it complies with Taiwanese law and international regulations. It did not respond to subsequent questions about the tender identifying its products as the source of banned Nvidia chips. Taiwan’s economy ministry said it expects Taiwanese companies to respect US export controls.

Research benefits

The transactions were revealed in a dozen tenders, which Reuters found on a public database covering only a fraction of purchases by Chinese state entities. But the snapshot shows China still has access to advanced chips that US officials say could support AI for military applications, such as the modernization of China’s defense forces or to develop weapons such as hypersonic missiles.

Each purchase is limited to a few servers and a few dozen banned chips. Still, they can be useful for training models and conducting advanced research, according to seven analysts and industry executives.

The tenders – valued at between 71,500 yuan and 1.86 million yuan, or about $10,000 and $259,000 – did not specify their intended use.

Under Chinese law, the procurement agency representing the state or state buyers must check whether the supplier can fulfill the tender before being announced as the winner and the contract signed.

Reuters only analyzed tenders whose winners had been announced.

Companies and people accused of violating US export controls can face civil or criminal penalties in the US, including hundreds of thousands of dollars in fines and up to 20 years in prison for individuals.

Reuters last year reported that underground trade in Nvidia chips had emerged in China, as evidenced at Shenzhen’s Huaqiangbei electronics market in June, before the US widened its sanctions. On a return visit in December, vendors who had spoken to Reuters months earlier had left, and other vendors said they did not know why they had left.

Reuters could not ascertain why the vendor was no longer on the market.