Nvidia’s growing demand gives way to underground high-end chips market in China

In an effort to halt Chinese advancements in artificial intelligence (AI) and supercomputing in the face of escalating political and trade tensions, President Joe Biden's administration introduced export restrictions for China. Despite putting export limitations, Chinese sellers are profiting from the soaring demand for high-end Nvidia chips, particularly the A100 artificial intelligence (AI) chips. 

Black market has emerged in China for acquiring chips 

In the wake of surged prices of Nvidia chips and restrictions imposed by the US, reports have claimed that a black market has emerged in China.The A100 chips, created by US chip designer Nvidia, may be purchased for an unbelievable $20,000 per unit—double the usual price by Chinese vendors. However, it's important to note that, it is not illegal to buy or sell high-end US chips in China, with vendors being cautious to not draw unnecessary attention from Chinese or US authorities, given the current scenario. 

Furthermore, individuals looking for these high-end chips have turned to Shenzhen's well-known Huaqiangbei electronics area, which is well-known for its extensive selection of electronic products, including drones and camera parts. While the chips are not publicly advertised, discreet inquiries can lead to acquiring them. 

Chinese authorities are speculated to be involved 

The information has further revealed that the global AI boom, specifically the success of OpenAI's ChatGPT has resulted in the high demand for Nvidia chips. Well, the volume of A100 and H100 chips entering China market still remains unknown, but buyers majorly are researchers, gamers, startups, and developers. Moreover, some local Chinese authorities are also speculated to have been involved in purchasing the chips. 

The chips are obtained by Chinese vendors in a variety of ways, such as by importing them through companies incorporated in other countries, such as India, Taiwan, and Singapore, or by obtaining extra stock after Nvidia sends significant volumes to important US corporations. However, the procurement of these chips is said to be insufficient for creating complex AI models from scratch. 

Views of US authorities on the current scenario 

In reaction to the situation, Nvidia said in a statement to Reuters that they do not approve the shipping of the A100 or H100 to China and instead provide reduced-capability substitutes that adhere to US regulations. "If we receive information that a customer is breaching their agreement with us and exporting restricted products in violation of the law, we would take immediate and appropriate action," the statement said.

Analysts believe that stricter rules could be imposed if China poses any danger in the near future. 

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— Paul Triolo (@pstAsiatech) May 24, 2023