Chinese universities and research institutions were still able to purchase servers equipped with the restricted GPU (Graphics Processing Unit) chips as of Feb. 28, despite US export restrictions on the chips being in place since October 2022 and tightened in November 2023, according to an exclusive report by Reuters.

Why it matters: The Reuters report reveals loopholes in the US export restrictions on high-performance GPU chips to China. The findings have raised concerns within the US government about the efficacy and enforcement of these regulatory measures.

Details: Ten Chinese entities acquired advanced Nvidia chips integrated into server products produced by Super Micro Computer, Dell Technologies, and Taiwan’s Gigabyte Technology after the US tightened licensing rules for chip exports on Nov. 17 2023, the Reuters review of tender documents revealed.

• In China, trading in GPU chips coming from the US is not illegal. Chinese retailers may have fulfilled orders using stockpiles acquired before the US tightened chip export restrictions in November.
• The buyers included the Chinese Academy of Sciences, the Shandong Artificial Intelligence Institute, Hubei Earthquake Administration, Shandong and Southwest universities, a tech investment firm owned by the Heilongjiang provincial government, a state-run aviation research center, and a space science center.
• Nvidia responded by stating that the relevant tenders were for products exported and widely used before Nov. 17 2023. Sales may have included inventory previously exported to Chinese distributors, and the documents did not indicate that any of its partners violated export control regulations, Nvidia said. The US chip giant added that it would conduct further investigations into the matter.
• Dell told Reuters it had not seen any evidence of servers containing restricted chips being shipped to China after the embargo was implemented. “If we become aware of a distributor or reseller that is not complying with these obligations, we take appropriate actions, including termination of our relationship,” a Dell spokesperson said.
• Gigabyte said in an email to Reuters that the company consistently complied with related laws and international regulations. It did not reply to inquiries regarding tenders that identified its products as a source of banned Nvidia chips.

Context: Last October, the US government announced new export regulations to prevent the sale of advanced artificial intelligence chips to China, impacting on sales for US companies such as Nvidia, Broadcom, AMD, and Intel.

• Last December, Nvidia unveiled a Chinese version of the RTX 4090 graphics card to adhere to US regulations, in an effort to maintain its market presence. The Chinese version of the graphics card has a 12.8% smaller CUDA core (down to 14,592 from 16,384) and consumes 5.9% less power (425W from 450W) compared with the standard RTX 4090.