Thanks to the development of the black market, Chinese companies and research institutes can still smuggle Nvidia’s high-end AI chips, even if the Washington government tightens the export ban.
The smuggled Nvidia chips will go to AI start-ups or research institutions with low demand that cannot buy chips in China. Photo: Bloomberg.
In the fall of 2023 in Singapore, a Chinese student is busy packing his luggage to go home for a vacation. In addition to clothes and shoes, his luggage also has 6 more Nvidia A100 AI chips.
As it turned out, a college friend asked him to buy them, because the U.S. restricted their exports to China. Each chip is almost the size of a Nintendo Switch game console, so this student is not suspicious at the customs gate. When he arrived, he would be paid $100 for each cross-border chip he carried.
According to the Wall Street Journal, this student is only a small part of the black market network here. In particular, buyers and sellers are looking for ways to bypass the US regulations banning the export of AI chips to China. In particular, Nvidia’s processors are very popular for their ability to process large calculations, which play an important role in the training of AI systems.
There is always a way to smuggle banned chips into China
Specifically, more than 70 distributors are publicly selling Nvidia’s banned chip models online. Many sellers say they have a supply of up to dozens of high-end Nvidia chips per month, which can then sell for about $300,000 for servers containing high-end Nvidia chips.
One of the six Nvidia A100 graphics processors packed in suitcases to smuggle to China last year. Photo: WSJ.
Usually, distributors will start by advertising product information in internal chat groups or selling on e-commerce sites such as Taobao and Alibaba’s Idle Fish. Many brick-and-mortar store owners in China’s leading AI research centers such as Shenzhen and Beijing also sell AI chips from Nvidia.
These intermediaries usually list a price of $22,500 for the A100 chip and $32,400 for the higher-end H100. This figure is $10,000 and $25,000 higher than the airline’s official price. However, many sellers said that black market prices have fallen by more than half compared to last summer, as supply gradually becomes more stable and the trend buying wave gradually cools down.
Idle Fish is an e-commerce platform where intermediaries sell Nvidia’s high-end AI chips and servers. Photo: WSJ.
Some traders reveal they have up to dozens of chips in stock at a time, and larger pre-orders can be delivered within 1-2 weeks. They insist that these chips are always in the original sealed box as when they were bought from the US.
“It’s a very difficult process, but there’s always a way to get chips,” a Beijing-based distributor told the Wall Street Journal. This person added that every month he will receive a shipment. Each shipment contains about a dozen chips. And so, this process has been going on for the past few months.
In particular, the chips that Chinese students brought back to the mainland came from a mysterious broker in Singapore called “Anh Jiang”. This person is very famous in the world of chip distribution and trading in the region.
Speaking to the Wall Street Journal, he said he leveraged his relationships with distributors and system integrators in Southeast Asia to help Chinese customers acquire chips and servers.
He said his customers include AI companies, research institutions and chip dealers. Some of his partners have set up companies in Singapore, Malaysia, Vietnam and Taiwan to circumvent U.S. restrictions.
Huaqiangbei Electronics Market in Shenzhen, China is one of the places where many Nvidia chip sellers gather. Photo: WSJ.
After placing an order, Jiang will provide logistical support for customers such as shipping products to each place individually, preparing documents for customs declaration, and contacting shipping companies. “We don’t take large orders because they are too easy to detect,” the broker said.
China has not yet been able to imitate the power of the Nvidia chip
Previously, in China, Nvidia’s highest-end chip line began to run out at the end of 2022, after Washington imposed export restrictions. The U.S. move has led to hundreds of thousands of Nvidia orders with a total value of at least $5 billion being canceled.
But thanks to the growing black market, Chinese research institutes and universities can still buy Nvidia’s high-end AI chips, even as the U.S. tightens restrictions. The purchases include the H100 chip, a processor that Nvidia has never officially shipped to China because of the export ban.
On the black market, there are still a few sellers who advertise Nvidia chips that they don’t have or sell chips that have been refurbished from old processors. But they can hardly sell counterfeit goods because the power of the Nvidia chip line is impossible to counterfeit.
Dealers in China typically sell $32,400 for the high-end Nvidia H100 chip. Photo: Bloomberg.
Industry sources said Chinese tech companies, including Huawei sanctioned by the US, are trying to create chips with similar power to Nvidia. However, they are facing limitations in both performance and technology.
In March, a leading research organization told Chinese Premier Li Qiang that training large AI models with domestic chips risks system-wide failures.
Therefore, the market for Nvidia’s high-end chips will remain strong, until domestically made chips appear in China.
The Chinese male student who brought Nvidia processors home said he was willing to continue shipping technology components across the border to make money.
“I’m glad I was able to do something for the country and make a little extra money. Then why not do it,” he told the Wall Street Journal.