TAIPEI (Taiwan News) — Chinese businesses are evading export restrictions to obtain Nvidia chips via underground channels.
Since October 2022, the Biden administration has imposed increasingly strict limits on exports of artificial intelligence (AI) chips to China over national security concerns. However, according to an investigation by the Wall Street Journal (WSJ), underground networks are still smuggling Nvidia's advanced AI chips into China through alternative channels.
The newspaper reported that a 26-year-old Chinese student in Singapore packed his luggage last autumn to prepare for a holiday back home. Among his belongings were six advanced Nvidia AI chips, entrusted to him by an acquaintance from university.
Each chip is reportedly comparable in size to a Nintendo Switch gaming console. The student passed through the airport without arousing suspicion. He mentioned receiving $100 (NT$3,200) in compensation for each chip.
The WSJ found that the underground network involved buyers, sellers, and couriers. This method enables bypassing the Biden administration's measures to prevent China from obtaining Nvidia's advanced AI chips.
At least 70 distributors openly advertise restricted Nvidia chips online. The Wall Street Journal directly contacted 25 of these distributors. Many verified sellers said they obtain dozens of Nvidia's high-end chips each month.
The newspaper found that the supply of Nvidia chips is so stable most sellers accept pre-orders and promise delivery within weeks. Some vendors sell entire servers, each containing up to eight high-end Nvidia chips, for approximately US$300,000.
While the quantity of Nvidia processors sold by these vendors may not satisfy the demands of a large tech company, it can meet the needs of AI startups or research institutions through this method.
The investigation included verifying purchases by Chinese buyers through underground channels, obtaining transaction records, customs documents, and photos of Nvidia chips available for sale.
Nvidia typically does not directly supply single high-performance data center chips to global AI customers. Instead, these chips are provided to third parties like Dell Technologies and Super Micro Computer, who then ship complete AI servers or systems to customers.
Industry insiders also mentioned that tracking these third-party equipment providers' final destinations for AI servers and Nvidia chips is limited if the end buyers decide to “route the servers—and the Nvidia chips inside them—to elsewhere.”
Both Dell Technologies and Super Micro Computer stated that they comply with U.S. export control regulations and take action upon detecting illegal activities.
Nvidia said it complies with U.S. export control regulations and primarily cooperates with “well-known partners” to adhere to relevant regulations.
According to international trade lawyers, many foreign governments and jurisdictions do not necessarily enforce U.S. control measures and typically do not view selling such chips to China as a criminal offense. Therefore, the student who transported Nvidia chips did not violate any laws in Singapore, as these technological components are not subject to export restrictions there.
Some sellers said this system partly relies on incomplete customs declarations to avoid alerting regulatory authorities.
According to WSJ's review of customs documents, in two transactions in March, a seller in Shenzhen, China, received 20 Nvidia graphics processing units (GPUs) from Singapore and another 40 from an exporter in Taiwan, without specifying the chip models.
The merchant informed the newspaper that these chips are high-end A100 processors, among the most strictly regulated chips.
The report concluded that until China can produce “viable domestically-produced chips,” the demand for Nvidia's high-end products and the supply chains surrounding them will probably “remain robust and adaptable.” The Chinese student who transported Nvidia processors in his luggage expressed willingness to carry these items again.
The student said, “I’m glad I was able to do something for my country—and make a little extra money. So, why not?”
