China — in its race to dominate artificial intelligence — is sourcing banned Nvidia chips through a vast underground network in Asia, The Wall Street Journal reports.
Ever since the U.S. Commerce Department in October 2022 began prohibiting export of Nvidia’s highly coveted AI chips to China, a nexus of Nvidia chip resellers, primarily in Singapore, Malaysia, Vietnam and Taiwan, began to form.
There are more than 70 of these shady resellers sourcing Nvidia chips — which they then mark up from $10,000 $22,500 for an A100 chip, and from $25,000 to $32,400 for a higher-end H100.
In some cases, individual couriers, many of them Chinese students, smuggle the Nvidia chips in their suitcases. In other instances, custom agents look the other way by accepting incomplete documents for shipments that don’t specify chip models or purpose.
“We don’t do big orders,” said one broker in Singapore, known as “Brother Jiang.”
“That would be too conspicuous,” Jiang added, noting that he began selling cloud computing software and hardware on the black market a decade ago.
The flow of the roughly 12,500 Nivida chips to China each year has become so steady that most of the sellers promise delivery within weeks. They even offer multiyear product guarantees and brazenly advertise on industry-group chats, online electronics yellow pages, and e-commerce websites such as Alibaba’s Taobao and Idle Fish.
Some even have physical storefronts in Shenzen and Beijing.
Some of these covert brokers are even selling entire servers, each equipped with eight high-end Nvidia chips, for $300,000.
While this number of chips pales in comparison with the 2.6 million A100 and H100 chips Nvidia sold worldwide in 2023 — technology insiders say that every chip matters to China in its AI trade war with the U.S.
The lion’s share of the Nvidia payload has gone to China’s elite Tsinghua University, state-sponsored Chinese Academy of Science, and AI startups.
Huawei has vowed it will produce chips to rival Nvidia’s, but sources say Huawei and other Chinese domestic chips crash when they are used to train large AI computer models.
Nvidia said it is not selling its advanced chips in China. Rather, Nvidia said, it relies on its partners, such as Dell and Super Micro Computer, which manufacture supercomputers with its chips, to comply with U.S. export regulations.
“We apply the same standard to all transactions, large or small, and expect our partners to do the same,” said an Nvidia spokesperson.
Likewise, Della and Super Micro said that they are complying with U.S. export controls.
The Commerce Department, which is responsible for enforcing U.S. trade restrictions, did not respond to WSJ requests for comment.
The Asian nations in the network don’t have laws against selling Nvidia or other high-end AI chips to China.
“Whether these transactions occur through distributors or intermediaries is very difficult to track,” said Frank Kung, a semiconductor analyst at TrendForce.
As for one Chinese student who smuggled Nvidia chips, who was paid $100 per chip, each the size of a Nintendo Switch game, he quipped: “I’m glad I was able to do something for my country and make a little money. So, why not?”
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