China acquired recently banned Nvidia chips in Super Micro, Dell
servers, tenders show
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[April 23, 2024] By
Eduardo Baptista, Fanny Potkin and Max A. Cherney
BEIJING/SINGAPORE (Reuters) - Chinese universities and research
institutes recently obtained high-end Nvidia artificial intelligence
chips through resellers, despite the U.S. widening a ban last year on
the sale of such technology to China.
A Reuters review of hundreds of tender documents shows 10 Chinese
entities acquired advanced Nvidia chips embedded in server products made
by Super Micro Computer Inc., Dell Technologies Inc. and Taiwan's
Gigabyte Technology Co Ltd after the U.S. on Nov. 17 expanded the
embargo to subject more chips and countries to licensing rules.
Specifically, the servers contained some of Nvidia's most advanced
chips, according to the previously unreported tenders fulfilled between
Nov. 20 and Feb. 28. While the U.S. bars Nvidia and its partners from
selling advanced chips to China, including via third parties, the sale
and purchase of the chips are not illegal in China.
The 11 sellers of the chips were little-known Chinese retailers. Reuters
could not determine whether, in fulfilling the orders, they used
stockpiles acquired before the U.S. tightened chip-export restrictions
in November.
Contacted by Reuters, Nvidia said the tenders specify products that were
exported and widely available before the restrictions. "They do not
indicate that any of our partners violated the export control rules and
are a negligible fraction of the products sold worldwide," a
spokesperson said.
The server makers said they complied with applicable laws or would
investigate further.
Among the buyers were the Chinese Academy of Sciences, the Shandong
Artificial Intelligence Institute, Hubei Earthquake Administration, the
Shandong and Southwest universities, a tech investment firm owned by the
Heilongjiang provincial government, a state-run aviation research
centre, and a space science center.
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None of the Chinese buyers and retail sellers responded to questions
from Reuters about the matter.
Daniel Gerkin, a Washington-based partner at law firm Kirkland & Ellis,
said Nvidia chips could have been diverted to China without a
manufacturer's knowledge, given a lack of visibility into downstream
supply chains.
If the manufacturer had performed sufficient due diligence, "it
presumably would be challenging for the U.S. government to pursue an
enforcement action", he said.
The U.S. Commerce Department told Reuters it could not comment on any
potential ongoing investigations, but said its Bureau of Industry and
Security monitored diversions of restricted chips, conducted end-use
checks and examined potential breaches.
Officials would investigate credible allegations of violations,
including through the use of shell companies, a spokesperson said.
Nvidia said systems built with its graphic processing units (GPUs) -
chips that break computer tasks into smaller pieces and process them
together - and resold by third parties must comply with U.S.
restrictions.
"If we determine that any product was subsequently resold in violation
of U.S. export control rules, we'll work with our customers to take
appropriate action," the spokesperson said.
Super Micro said it complied with U.S. requirements on the sale and
export of GPU systems to regions and parties that require licenses.
"If we become aware that a third party has exported or reexported
without the required licenses, we investigate the matter and take
appropriate action," it said.
In a letter to Reuters on behalf of Super Micro, U.S. law firm Clare
Locke said its client "goes above and beyond what U.S. export
restrictions require" by proactively taking steps to ensure its
customers do not violate the curbs.
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A smartphone with a displayed NVIDIA logo is placed on a computer
motherboard in this illustration taken March 6, 2023. REUTERS/Dado
Ruvic/Illustration/File Photo
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In relation to the tenders that identified its products, Super Micro
said they represent "older generation or general purpose servers not
capable of the largest scale AI operations that were available in
China prior to the export control regulations". The awarded
suppliers "are not known Supermicro customers", the company said.
A Dell spokesperson said the company "found no evidence of shipping
products configured with the restricted chips you listed to the
entities you named", but that it would 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 is not complying with these
obligations, we take appropriate actions, including termination of
our relationship," the spokesperson said.
Gigabyte said in an email that it complied with Taiwanese laws and
international regulations. It did not respond to subsequent
questions about tenders that identified its products as a source of
banned Nvidia chips. Taiwan's economy ministry said it expected
Taiwanese companies to respect U.S. export controls.
RESEARCH BENEFITS
The transactions were disclosed in a dozen of the tenders, which
Reuters found on public databases that cover only a fraction of
purchases by China's state entities. But the small snapshot shows
China still has access to advanced chips that U.S. officials say
could support AI for military applications, such as the
modernization of China's defense forces or for developing weapons
like hypersonic missiles.
Each of the purchases were limited to several servers and several
dozen banned chips. Still, they could be useful for training models
and conducting advanced research, according to seven analysts and
industry executives.
The tenders - valued at between 71,500 yuan and 1.86 million yuan,
or about $10,000 and $259,000 - did not specify the intended uses.
Under Chinese law, procuring agencies representing state or
state-affiliated buyers must check that a supplier can fulfill the
tender before it is announced as the winner and a contract is
signed.
Reuters only analyzed tenders whose winners had been announced.
Companies and people accused of violating U.S. export controls can
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.
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Reuters last year reported that an underground trade in Nvidia chips
had emerged in China, as evident at Shenzhen's Huaqiangbei
electronics market in June, before the U.S. widened its curbs. On a
return visit in December, the vendors who had spoken to Reuters
months earlier had gone, and other sellers said they did not know
why they left.
Reuters couldn't establish why the vendors were no longer at the
market.
($1 = 7.1932 Chinese yuan renminbi)
(Cherney reported from San Francisco. Additional reporting by
Beijing newsroom, David Kirton in Shenzhen, Josh Ye in Hong Kong,
Stephen Nellis in San Francisco, Alexandra Alper and Karen Freifeld
in Washington and Ben Blanchard in Taipei; Editing by Brenda Goh and
David Crawshaw)
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