Chinese govt, military buying Nvidia chips to power AI tools despite US ban

Chinese institutions, including military, have acquired Nvidia semiconductors, which were banned by the US from being exported to China, according to a review of tender documents by Reuters.

While buying or selling these US chips is not illegal in China, the documents reveal that various Chinese entities, including universities and those subject to US export restrictions, have acquired these chips since the bans were imposed.

An underground market for such chips has emerged in China, with vendors obtaining excess stock or importing through companies in other countries.

Nvidia stated it complies with export control laws and takes action against unlawful resale, while US authorities aim to tighten restrictions and limit access to the chips by Chinese companies outside China.

"If we learn that a customer has made an unlawful resale to third parties, we'll take immediate and appropriate action," a company spokesperson said.

The review identified more than 100 tenders where state entities procured A100 chips and revealed purchases of the A800 despite the ban. Some tenders, including those from Tsinghua University and a laboratory under the Ministry of Industry and Information Technology, indicate purchases of H100 chips. Military tenders, though often redacted, show entities seeking these chips for AI applications.

While the quantities are small, they can enhance existing AI models. For instance, a contract awarded by the Shandong Artificial Intelligence Institute for five A100 chips was worth 290,000 yuan.

Chris Miller, a professor at Tufts University and the author of "Chip War: The Fight for the World's Most Critical Technology," said that expecting US export restrictions on chips to be completely foolproof is unrealistic. He said that the small size of chips makes them easy to smuggle, posing challenges to achieve a watertight control.

Miller emphasised that the primary objective of these restrictions is to impede China's AI development.

In October 2023, the Biden administration strengthened export controls on semiconductor chips and related manufacturing equipment for artificial intelligence, aiming to hinder China's access to advanced chips.

The updated rules revised restrictions imposed a year earlier, prohibiting the sale of chips exceeding a specific capability threshold in China and other restricted countries, along with banning specific chip manufacturing equipment. These rules addressed loopholes from the 2022 export control measures and considered technological advancements.