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China circumvents US chip ban with server trick
Learn how China is circumventing the US ban on AI chip exports and the impact this has on the market. Nvidia, Huawei and Apple in focus. Embargo circumvented? Here is the analysis.
China circumvents US chip ban with server trick
China has apparently found a way to circumvent the US export ban on high-performance processors aimed at selling AI chips to the People's Republic. Chinese companies have reportedly purchased ten servers equipped with the latest artificial intelligence-optimized chips from global market leader Nvidia. These servers come from US manufacturers such as Super Micro Computer and Dell as well as the Taiwanese provider Gigabyte. The purchased products were then forwarded to Chinese universities and research institutes. It is not yet clear whether the purchases were made before or after the US embargo.
Nvidia and the server manufacturers mentioned emphasize that they comply with applicable laws and announce internal investigations. The chip manufacturer explains that the listed products were generally available before the embargo and there is no evidence of violations of export control regulations by its partners. However, the USA prohibits the sale of high-performance processors to the People's Republic, which also applies to transactions through third parties. These sales are legal in China itself.
Monitoring these transactions is difficult and it is possible that chips could end up in China without the manufacturers' knowledge. This makes it difficult for the American government to enforce the ban. Although the publicly available records only cover a fraction of purchases by Chinese state institutions, the identified shipments are still useful for AI training and research. The US Department of Commerce has not confirmed any current investigations into the matter, but is keeping an eye on the situation to ensure the embargo is being complied with.
Regardless of these developments, China remains a challenging market for Apple, especially in the smartphone segment. Sales of iPhones fell almost 20 percent in the first quarter, while rival Huawei increased its sales by almost 70 percent. Huawei, whose smartphone “Mate 60 Pro+” attracted worldwide attention, was able to take market share from Apple. The political tensions between the US and China are also having an impact, as public institutions and state-owned companies are reportedly no longer allowed to use iPhones for business purposes.