A network of smugglers is helping the Chinese military obtain high-performance microchips made by US company Nvidia under the noses of a US national security blockade aimed at curbing China’s AI development.
The United States is competing with China for dominance in the AI industry, and the Biden administration plans to expand the export ban on semiconductor manufacturing equipment to Israel, Taiwan, Singapore and Malaysia to maintain its global dominance.
The United States is also concerned that advanced artificial intelligence could be used to modernize foreign militaries, threatening U.S. security around the world.
Nvidia’s chips have powered the global AI boom and made it one of the world’s most profitable companies. The United States allows Nvidia to sell only its less powerful chips in China.
But a New York Times investigation found that corporate networks were circumventing the blockade to obtain Nvidia’s latest chips and sell them to government-backed entities in China. Representatives of 11 companies in China told the Times that they had “sold or shipped banned Nvidia chips.” The paper also found dozens of websites in China selling the chips online.
A review of procurement documents by the Center for Advanced Defense Studies, a Washington-based nonprofit, found that more than a dozen government-related entities bought Nvidia chips on the black market.
The US government has warned that some of these groups have aided the Chinese military, and The New York Times reported that one of these groups, a university affiliated with the Chinese Academy of Sciences, used AI powered by Nvidia chips in its nuclear weapons research.
One Chinese entrepreneur told The Times that his company shipped 2,000 servers with “cutting-edge” Nvidia chips to China in April. He told the paper that he made $103 million in sales. He said the chips were not hard to come by, and that he regularly gets banned chips from three or four suppliers and sells them to repeat buyers in China.
Nvidia says it complies with U.S. regulations but has no control over its entire supply chain.
“We comply with all U.S. export regulations and expect our customers to do the same,” NVIDIA spokesperson Clarissa Eyu told Business Insider. “Our used products are available through a number of second-hand sales channels. While we cannot track products after they are sold, we take appropriate action if we determine that U.S. export regulations are being violated.”
