In September 2022, the US announced new export controls targeting China. These controls specifically prohibited US-based companies, such as Nvidia, from exporting powerful chips such as the H100 chips to China. However, a report by news agency Reuters has revealed that Chinese entities, including military bodies, state-run AI research institutes, and universities, have managed to purchase these banned Nvidia semiconductors.

The report cites tender documents as evidence, stating that these Chinese institutions have obtained the banned chips from largely unknown Chinese suppliers. Neither Nvidia nor its approved retailers are the suppliers of these banned chips.

Following the US restrictions, an underground market for these banned chips has surfaced in China. Chinese vendors claim that they acquire excess stock, which finds its way into the market after Nvidia ships large quantities to major US firms. These vendors also assert that they import the chips through locally incorporated companies in countries like India, Taiwan, and Singapore. This development is particularly significant because it indicates that China has managed to obtain banned Nvidia semiconductors, effectively contradicting the restrictions imposed by the US.

The banned chips at the center of this controversy include the A100 and H100 chips, which were prohibited from export to China and Hong Kong in September 2022. In response, Nvidia developed slightly less powerful chips, namely the A800 and H800, specifically for the Chinese market. However, the US also banned the export of these chips in October, subsequently forcing Nvidia to develop even less powerful alternatives. China is reported to have purchased both the A100, H100, A800, and H800 chips.

Nvidia’s GPUs are in high demand due to their recognized superiority over rival products in the field of AI work, offering efficient performance that is essential for machine learning tasks. Prior to the bans, Nvidia held an impressive 90% share of China’s AI chip market, as stated in the report.

The report also identifies the buyers of these banned Nvidia chips, which include elite universities and two entities subject to US export restrictions – the Harbin Institute of Technology and the University of Electronic Science and Technology of China. These entities have been accused of involvement in military matters or being affiliated with military bodies.

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