Introduction to US Export Controls
US export controls have had some effect on the black market. Given the nature of such products, leading Chinese AI players with global operations are not able to order them in a legally compliant way, install them in their own data centers, or receive Nvidia’s customer support.
Impact on Chinese Companies
This has led to third-party data centre operators becoming key buyers who then provide computing services. Other clients include smaller companies in tech, finance, and health care that do not have strong compliance requirements, as well as Chinese companies on the so-called US entity list that are not allowed to buy any Nvidia chips legally. However, the scale of these projects is much smaller compared with mega clusters of data centers being built by tech giants around the world.
Relaxation of H20 Export Controls
With H20 export controls having been lifted, many Chinese tech companies are expected to resume purchasing the compliant chips in large sums even though its performance is generations behind the still restricted products such as B200, according to people familiar with their plans. Black market sales for B200s and other restricted Nvidia chips dropped noticeably after the relaxation of the H20 ban, according to multiple distributors.
The Black Market for Nvidia Chips
“People are weighing their options now H20 is available again,” said one distributor. “But there will always be demand for the most cutting-edge stuff.” The demand for advanced AI chips is driving the black market, with Chinese companies looking for ways to obtain restricted chips.
The Southeast Asia Stop Off
Industry experts said that Southeast Asian countries have become markets where Chinese groups obtained restricted chips. The US Department of Commerce is discussing adding more export controls on advanced AI products to countries such as Thailand as soon as September, according to two people familiar with the matter. This rule is mainly targeting Chinese intermediaries used to obtain advanced AI chips via these countries.
New Export Controls
Earlier this month, Malaysia introduced stricter export controls targeting advanced AI chip shipments from the country to other destinations, especially China. The potential tightening of export controls on Southeast Asian countries has also contributed to buyers rushing to place orders before such rules take effect, according to people with knowledge of the matter.
Finding New Routes
Even if these avenues to obtain AI chips are closed, Chinese industry insiders said new shipping routes would be established. Supplies have already started arriving via European countries not on the restricted list. “History has proven many times before that given the huge profit, arbitrators will always find a way,” said one Chinese distributor.
Conclusion
The US export controls on advanced AI chips have had a significant impact on the black market, with Chinese companies looking for ways to obtain restricted chips. The relaxation of H20 export controls has led to a decrease in black market sales, but the demand for cutting-edge technology is driving the black market. As new export controls are introduced, Chinese companies are finding new routes to obtain restricted chips.
FAQs
Q: What are US export controls, and how do they affect Chinese companies?
A: US export controls restrict the sale of advanced AI chips to certain countries, including China. This affects Chinese companies that need these chips for their operations.
Q: Why are Chinese companies looking for ways to obtain restricted chips?
A: Chinese companies need advanced AI chips for their operations, and the restricted chips offer better performance.
Q: How are Chinese companies obtaining restricted chips?
A: Chinese companies are obtaining restricted chips through the black market, using third-party data centre operators, and finding new shipping routes via European countries.
Q: What is the impact of the relaxation of H20 export controls on the black market?
A: The relaxation of H20 export controls has led to a decrease in black market sales, as Chinese companies can now purchase compliant chips.
Q: What is the US Department of Commerce doing to prevent the sale of restricted chips to Chinese companies?
A: The US Department of Commerce is discussing adding more export controls on advanced AI products to countries such as Thailand and introducing stricter export controls on Southeast Asian countries.
