Underground Network Smuggles Nvidia's AI GPUs into China Despite US Sanctions
An underground network is sneaking Nvidia AI processors into China, circumventing US export rules. More than 70 distributors openly offer these prohibited chips online, with some selling full systems. A Chinese student successfully sneaked Nvidia AI chips from Singapore into China while escaping suspicion.
Despite US limitations intended at limiting China's access to modern AI and HPC processors, a network of buyers, sellers, and couriers has circumvented export bans on Nvidia's processors, which are critical for training AI systems. According to the Wall Street Journal, at than 70 vendors openly market these chips online, with some offering full servers.
In a risky operation last autumn, a 26-year-old Chinese student successfully smuggled Nvidia AI chips from Singapore to China. Each add-in-board, roughly the size of a Nintendo Switch, was concealed alongside his personal belongings and went undiscovered at the airport. The student declared a value of only US$100 per card, substantially lower than the underground market value, averting suspicion from authorities in both Singapore and China.
This student's actions are merely one part of a larger, loosely hidden operation to circumvent US government regulations. Nvidia's AI processors are widely sought after in China's AI market, with the company's CUDA framework in particular popular among academic and commercial developers. As a result, many distributors promote these limited processors online, with trusted merchants claiming to have hundreds available each month. Some even sell systems with eight Nvidia chips inside for $300,000.
While Chinese merchants normally charge a premium for these chips, prices have recently fallen due to increasing supply and a reduction in panic buying. Although the actual amount of this subterranean market is unknown, it is considered minor in comparison to the broader market.
According to the Wall Street Journal, a broker in Singapore named Brother Jiang plays a crucial role in assisting smuggling. Jiang assists Chinese customers in obtaining powerful AI processors and servers by leveraging contacts in Southeast Asia's distribution channels and system integrators, as well as handling logistics and customs procedures. Jiang's network remains unseen by avoiding large orders while supplying Nvidia's high-end chips on a consistent basis.
The smuggled chips, particularly the A100 and H100 variants, are sold at inflated prices in China. Nvidia officially does not sell these chips to China due of export limitations. However, Chinese research institutes and colleges continue to acquire them through unofficial means. Despite the fact that official supplies remain limited, the underground market has evolved to suit continuing demand.
The Wall Street Journal proved the existence of this underground market using Chinese buyers, transaction data, customs filings, and process images. The US Commerce Department, which is in charge of implementing export regulations, has not commented on the case.
Nvidia distributes its data centre CPUs to third-party firms such as Dell, HPE, and Supermicro, which then build and sell AI servers. Sometimes these enterprises order more processors than are required and sell the excess via illegitimate channels. While all corporations claim to follow US export rules and take action against illegal operations if discovered, some parts are beyond their control because they also sell to smaller value-added resellers.
Chinese technology businesses are busily creating their own high-end AI chips, but they confront substantial obstacles. Until China can produce comparable AI chips domestically, the black market for Nvidia's advanced products is likely to persist. The student who successfully smuggled the chips expressed a willingness to continue smuggling, driven by both financial gain and a sense of national contribution. This indicates the presence of a persistent and adaptive illicit supply chain that circumvents US export rules.
An underground network is smuggling Nvidia's AI processors into China, bypassing US export controls.
Over 70 distributors openly advertise these restricted chips online, with some even selling entire servers.
A Chinese student successfully smuggled Nvidia AI processors from Singapore to China, avoiding suspicion.
Source: TOM'S HARDWARE