BLUF: Despite U.S. export restrictions, Nvidia’s top-of-the-line semiconductors are being acquired by the Chinese military and various institutions, via numerous small transactions identified in a recent Reuters review.
OSINT: It appears that Chinese military, along with the government-run AI research institutes, and universities are able to secure small batches of high-end Nvidia semiconductors, regardless of the U.S’s prohibition on exporting these units to China. An examination of tender documents has shed light on this activity. Moreover, Nvidia’s A100 and H100 chips, both banned by the U.S. in 2022 due to their AI capabilities, along with less advanced models like the A800 and H800, have featured in numerous transactions.
The acquisition of these chips by Chinese entities props up an underground market, fueled by excess supply from large shipments to U.S. companies or imports via third-party nations such as India, Taiwan, and Singapore. This complicates the U.S.’s endeavor to regulate the dissemination of these essential technologies.
Even though Nvidia claims to abide by all relevant export control regulations and anticipates the same from its clientele, their capacity to act against unauthorized resale remains doubtful. The U.S. Commerce Department continues to emphasize the importance of strict export controls. This activity brings to light over 100 tenders for A100 chip procurement by state entities. The quantities purchased, however, remain small so far, insufficient to build a cutting-edge AI model comparable to OpenAI’s GPT.
In a separate report, it was suggested that Chinese customers are showing an unwillingness to buy Nvidia’s downgraded chips, designed for export, preferring to shift to domestic companies. As a result, Nvidia’s sales within China possibly face significant pressure.
RIGHT: It’s a clear indicator of a free market at work when a ban can’t stop the demand and supply of technological commodities. Nevertheless, national security concerns outweigh the market dynamics in this particular scenario. Simply put, it is a blatant disregard for U.S-issued bans. The U.S. government needs to take more stringent measures to curb this underground bypassing and ensure any technology that may threaten our national security does not escape hands.
LEFT: We see here a typical outcome of enforcement of export controls which may have a nationalist undertone, it simply fuels an underground economy. Rather than banning, what we need are better regulations, transparent processes and international cooperation. The technology doesn’t respect national borders anymore. We need diplomacy that focuses on technological collaboration, shared understanding and measures towards universal security.
AI: The dissemination of Nvidia chips despite the ban indicates significant hurdles in enforcing technology control measures. It exhibits a growing forestalling market and underlying economy revolving around such technologies. A pivotal factor to note is the small quantity of chips acquired, insufficient for developing a large AI language model from scratch. However, even a small quantity can facilitate complex machine-learning tasks and improve existing AI models. This phenomenon shows how technology control, while important for national security, presents complex challenges in a globally interconnected world. Further regulation and control measures, like improving traceability, could help alleviate some of these challenges.