China’s Secretive Market: Unearthing the Realm of High-End Nvidia AI Chips

In the clandestine realm of Chinese tech enthusiasts, whispers abound regarding the acquisition of top-tier Nvidia AI chips in the face of U.S. sanctions. A journey to Shenzhen’s renowned Huaqiangbei electronics area reveals a promising option within the towering SEG Plaza. Concealed within its first ten floors, a multitude of shops offer an array of electronic marvels, albeit discreetly. These elusive chips, not openly advertised, can be obtained through discreet inquiries.

However, entering this clandestine domain comes at a price. Speaking with two anonymous vendors on-site, Reuters discovered that these merchants were capable of procuring limited quantities of the coveted A100 artificial intelligence chips from the esteemed U.S. chip designer, albeit at a hefty price of $20,000 per unit—a staggering double the usual cost.

While the act of buying or selling high-end U.S. chips remains legal in China, the export restrictions imposed by the United States have given rise to an underground market. Vendors navigate this covert landscape with great caution, avoiding scrutiny from both U.S. and Chinese authorities.

President Joe Biden’s administration, in a bid to impede China’s AI and supercomputing development amid escalating political and trade tensions, prohibited Nvidia from exporting its most advanced chips—the A100 and the recently developed H100—to mainland China and Hong Kong. This move was followed by an array of export controls relating to semiconductors.

However, with the global boom in AI, catalyzed by the remarkable success of OpenAI’s ChatGPT, the demand for high-end chips has skyrocketed, particularly for Nvidia’s microprocessors, renowned for their exceptional machine-learning capabilities.

Ivan Lau, co-founder of Hong Kong’s Pantheon Lab, seeking to acquire 2-4 new A100 cards for the startup’s latest AI models, confirmed negotiations with two vendors. These vendors, having sourced the chips outside the U.S., quoted a price of HK$150,000 ($19,150) per card, with the caveat that no warranty or support would be provided.

Reuters engaged with ten vendors in Hong Kong and mainland China, all of whom confirmed their ability to easily procure small quantities of A100 chips. This information sheds light on both the intense demand for these chips in China and the relative ease with which small-scale transactions circumvent Washington’s sanctions.

Reuters was unable to estimate the overall volume of Nvidia A100 and H100 chips flowing into China or determine the extent to which these transactions satisfy the existing demand.

Typical buyers include app developers, startups, researchers, gamers, and even Chinese local authorities, according to the vendors interviewed. Due to the violation of U.S. trade restrictions, these sources declined to disclose their identities.

In response to Reuters’ inquiry, Nvidia stated that it does not permit exports of A100 or H100 chips to China, instead offering reduced-capability alternatives that adhere to U.S. law. The company emphasized its commitment to taking immediate and appropriate action against customers found to be breaching their agreement and unlawfully exporting restricted products.

A spokesperson from the U.S. Department of Commerce acknowledged that export control measures have significantly impacted China’s access to high-end chips. The statement added that reports of illicit attempts to obtain these chips were not surprising and assured that allegations of violations are thoroughly investigated.

Neither China’s State Council Information Office nor the country’s industry ministry provided a response to requests for comment.

Nvidia projected potential losses of $400 million in sales during its third quarter if Chinese firms opt not to purchase alternative Nvidia products. To mitigate this impact, the company introduced slower variants tailored for the Chinese market—the A800 and H800—which have been acquired by tech giants Tencent Holdings and Alibaba.

The Chinese vendors revealed two

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