Eduardo Baptista, Fanny Potkin and Max A. Cherny
BEIJING/SINGAPORE (Reuters) – Chinese universities and research institutes recently purchased high-end artificial intelligence chips from Nvidia (NASDAQ:) through resellers, even as the United States last year extended a ban on selling such technology to China.
A Reuters review of hundreds of tender documents shows 10 Chinese companies have bought advanced Nvidia chips built into server products made by Super Micro Computer (NASDAQ:) Inc., Dell Technologies Inc. (NYSE:) and Taiwan’s Gigabyte Technology Co Ltd after the US embargo was extended on November 17 to subject licensing rules to more chips and countries.
Specifically, the servers contained some of Nvidia’s most advanced chips, according to previously unreported tenders held between November 20 and February 28. Although the US prohibits Nvidia and its partners from selling advanced chips to China, including through third parties, selling and buying chips is not illegal in China.
The 11 chip sellers were little-known Chinese retailers. Reuters was unable to determine whether they were using inventory purchased before the U.S. tightened restrictions on chip exports in November to fill the orders.
In a report to Reuters, Nvidia officials said the tenders included products that were exported and widely available before the restrictions were imposed. “They do not indicate that any of our partners violated export control regulations and represent a small portion of products sold worldwide,” a company spokesman said.
The server makers said they will comply with applicable laws or will investigate further.
Buyers included 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 government-owned aviation research center and a space research center. .
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None of the Chinese buyers and retailers responded to Reuters questions on the matter.
Daniel Gerkin, a Washington partner at law firm Kirkland & Ellis, said Nvidia chips may have been diverted to China without the manufacturer’s knowledge, given the lack of control over supply chains.
If the manufacturer had done enough due diligence, “it would presumably be difficult for the U.S. government to take enforcement action,” he said.
The US Commerce Department told Reuters it could not comment on any potential ongoing investigations, but said its Bureau of Industry and Security was monitoring the diversion of restricted chips, conducting end-use audits and looking into potential violations.
Officials will investigate credible allegations of irregularities, including the use of shell companies, the spokesman said.
Nvidia said systems built using its graphics processing units (GPUs) – chips that break computer tasks into smaller pieces and process them together – and resold to third parties must comply with US restrictions.
“If we discover that any product has subsequently been resold in violation of U.S. export controls, we will work with our customers to take appropriate action,” the spokesperson said.
Super Micro said it has met U.S. requirements to sell and export GPU systems to regions and parties that require licenses.
“If we become aware that a third party has exported or re-exported products without the required licenses, we will investigate the matter and take appropriate action,” it said.
In a letter to Reuters on behalf of Super Micro, US law firm Clare Locke said its client was “doing everything possible that US export restrictions require” by proactively taking steps to ensure its clients do not violate restrictions.
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Regarding the tenders that identified its products, Super Micro said they were “older generation or general-purpose servers that are not capable of large-scale artificial intelligence operations that were available in China before export control regulations.” The awarded suppliers “are not known Supermicro customers,” the company said.
A Dell spokesperson said the company “has not found any evidence that products equipped with the restricted chips you identified were shipped to the entities you identified” but will 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 that does not comply with these obligations, we will take appropriate action, including terminating our relationship,” the spokesperson said. .
In an email, Gigabyte said it complies with Taiwanese laws and international regulations. The company did not respond to follow-up questions about the tenders, which identified its products as the source of banned Nvidia chips. Taiwan’s Ministry of Economic Affairs said it expects Taiwanese companies to comply with U.S. export controls.
BENEFITS OF RESEARCH
The deals were revealed in a dozen tenders that Reuters found in public databases covering just a fraction of China’s state-owned enterprise procurement. But this small snapshot shows that China still has access to advanced chips that U.S. officials say could power AI for military applications such as modernizing China’s defense forces or for developing weapons such as hypersonic missiles.
Each purchase was limited to several servers and several dozen prohibited chips. However, they can be useful for training models and conducting cutting-edge research, according to seven analysts and industry executives.
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The tenders, ranging from 71,500 yuan to 1.86 million yuan, or $10,000 to $259,000, did not specify their intended use.
Under Chinese law, procurement agencies representing government or government-linked buyers must check whether a supplier can complete a tender before it is declared the winner and a contract is signed.
Reuters analyzed only tenders whose winners were announced.
Companies and people accused of violating U.S. export controls may face civil or criminal penalties in the U.S., including fines of hundreds of thousands of dollars and up to 20 years in prison for individuals.
Reuters reported last year that an underground trade in Nvidia chips had emerged in China, which was evident at the Huaqiangbei electronics market in Shenzhen in June, before the US expanded its restrictions. During a return visit in December, sellers who had spoken to Reuters several months earlier left, and other sellers said they did not know why they left.
Reuters was unable to determine why the sellers were no longer on the market.
($1 = 7.1932 yuan)
(Black reported from San Francisco. Additional reporting by the Beijing newsroom, David Kirton in Shenzhen, Josh Yeh in Hong Kong, Stephen Nellis in San Francisco, Alexandra Alper and Karen Freifeld in Washington and Ben Blanchard in Taipei; Editing by Brenda Guo and David Crawshaw )