Chinese Company Finds Ways To Access Nvidia AI Chip Despite Being Sanctioned By US, Price Reaches IDR 300 Million

Illustration of the Nvidia Chip, (photo: dock. pexels)

JAKARTA - In the face of US sanctions, Chinese buyers can still buy high-end artificial intelligence (AI) chips from Nvidia in the famous electronic area of Huaqiangbei in the southern Chinese city of Shenzhen.

The SUG Plaza skyscraper located in the area has the first 10 floors filled with shops selling various electronic components, including Nvidia chips. Although the chip is not publicly advertised, buyers can ask the seller in secret.

However, the Nvidia chip is not cheap. Two sellers there interviewed by Reuters on condition that anonymity states that they can provide a small amount of Nvidia's AI A100 chip at a price of 20,000 US dollars (IDR 300 million) per unit, double the usual price.

Although buying or selling high-end US chips has not violated China's laws, US export restrictions have created a black market where sellers are trying not to attract the attention of US and Chinese authorities.

In September, President Joe Biden's administration ordered Nvidia to stop the exports of its two most advanced chips, namely A100 and H100, to mainland China and Hong Kong. This move is part of efforts to hinder China's development of artificial intelligence and supercomputation in the face of growing political and trade tensions. The action was followed by a number of semiconductor-related export controls.

However, with the boom in the use of artificial intelligence worldwide after OpenAI's ChatGPT success, demand for high-end chips is growing rapidly, especially for Nvidia microprocessors who are considered the best in handling machine learning tasks.

A number of sellers in Hong Kong and mainland China interviewed by Reuters revealed that they could easily acquire a small amount of the A100 chip. While Reuters cannot estimate the total number of Nvidia A100 and H100 chips entering China, this information shows a high demand in China for the chip and the ease of avoiding US sanctions for small transactions.

The chip buyer is usually an app developer, startup, researcher, or gamer. One of the sellers said buyers also included local Chinese authorities.

Nvidia stated in a statement to Reuters that it does not allow the export of the A100 or H100 chips to China, but provides replacement products with lower capabilities in accordance with US law. If they receive information that customers violate the agreement with them and export prohibited products against the law, they will take appropriate action.

The US Department of Commerce, China's State Council Information Office, and China's Ministry of Industry did not respond to requests for comment.

Nvidia stated in September that sales of 400 million US dollars (Rp 6 trillion) during the third quarter could be lost if Chinese companies decided not to buy replacement products for Nvidia. Substitute products that have just been developed specifically for the Chinese market, namely the A800 and H800 variants, are now purchased by major Chinese technology companies such as Tencent Holdings and Alibaba.

Chinese sellers revealed that they acquired the chip in two main ways: buying the remaining stock available after Nvidia shipped large quantities to large US companies, or importing through listed companies such as India, Taiwan, and Singapore.

This means that the number of chips they can get is very limited, far from the amount needed to build large language models of artificial intelligence such as GPT from OpenAI. According to research firm TrendForce, GPT-like models require more than 30,000 Nvidia A100 cards. However, some of these cards are sufficient to carry out complex machine learning tasks and improve existing AI models.

According to an electronic procurement website that lists about 40 A100 sellers, most of the sellers are located in the Huaqiangbei electronics area. However, the A100 can also be found on Alibaba's Taobao e-commerce site, Xiaohongshu which is similar to Instagram, as well as on Douyin, the Chinese version of TikTok. Alibaba, Xiaohongshu, and ByteDance, which owns Douyin, did not comment on this.

Some sellers warn that fraud has become common, with used chips equalized as A100.

While the more sophisticated H100 chip than Nvidia, which has only been on the market since March, is much more difficult to find. Only one in ten sellers interviewed by Reuters said they could earn H100.

Charlie Chai, a Shanghai-based analyst, stated that the US may not be too worried about small transactions related to the chip. He said that "new if/where China is a bigger threat after successfully catching up, we will see tighter enforcement." He also added that the premiums received by Chinese sellers for the A100 and H100 chips could collapse in the future when many Chinese AI startups are pushing the purchases to eventually withdraw from the market.

Thus, while US sanctions have restricted access to Nvidia's AI chips in China, the existing high demand and black market have allowed Chinese buyers to continue to acquire the chip through unofficial channels.