HONG KONG/SHENZHEN, China, June 20 (Portal) – Shh! Where Can a Chinese Buyer Buy Top Nvidia (NVDA.O) AI Chips After US Sanctions?
A visit to the famed electronics district of Huaqiangbei in the southern Chinese city of Shenzhen is a good bet — particularly the SEG Plaza skyscraper, whose first 10 floors are packed with shops selling everything from camera parts to drones. The chips are not advertised, but discreet asking works.
They aren’t cheap. Two vendors there, who spoke to Portal in person on condition of anonymity, said they could supply small batches of the US chip designer’s A100 artificial intelligence chips at $20,000 a piece — twice the usual price.
While buying or selling high-quality US chips in China is not illegal, US export restrictions have effectively created an underground market where vendors are careful not to submit to scrutiny by US or Chinese authorities.
President Joe Biden’s administration in September ordered Nvidia to stop exporting its two most advanced chips — the A100 and the recently developed H100 — to mainland China and Hong Kong. This was followed by a series of export controls related to semiconductors.
But while AI is booming around the world following the resounding success of OpenAI’s ChatGPT, demand for high-end chips has skyrocketed, particularly Nvidia’s microprocessors, which are widely regarded as the best for handling machine learning tasks.
“We’re now talking to two vendors to get some,” said Ivan Lau, co-founder of Hong Kong’s Pantheon Lab, who is trying to buy two to four new A100 cards to power the startup’s latest AI models.
Vendors buying the chips outside of the US have quoted HK$150,000 (US$19,150) per card, he said, adding, “They told us directly there will be no warranty or support.”
Portal spoke to 10 suppliers in Hong Kong and mainland China who reported they could easily source small quantities of A100s. Their information highlighted both China’s strong demand for the chips and the relative ease with which Washington’s sanctions can be circumvented for small-volume transactions.
Portal was unable to estimate the total volumes of Nvidia A100 and H100 chips flowing into China or to what extent the transactions made are helping to meet demand.
The buyers are typically app developers, startups, researchers or gamers, said the sellers, who declined to be named because the imports violate U.S. trade restrictions. A seller said buyers included Chinese local authorities.
Nvidia said in a statement to Portal that it would not allow the A100 or H100 to be exported to China, instead providing replacement products with limited performance that comply with US law.
“If we receive information that a customer is violating their agreement with us and is exporting prohibited products in violation of the law, we will take immediate and appropriate action,” the statement said.
The US Department of Commerce, the Chinese State Council Information Office and the Chinese Ministry of Industry did not respond to requests for comment.
Nvidia said in September that $400 million in revenue could be lost in the third quarter if Chinese firms decide not to buy alternative Nvidia products.
The new, China-tailored, slower variants – the A800 and H800 – were designed to cushion that impact and are now being bought up by big Chinese tech companies like Tencent Holdings (0700.HK) and Alibaba (9988.HK), which have over large purchases feature huge amounts.
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Chinese suppliers said they sourced the chips in two main ways: by buying up excess inventory that finds its way into the market after Nvidia has shipped large quantities to major U.S. firms, or by importing it through local companies in countries like India, Taiwan and Singapore.
This means that the amounts they can back up are small and far from enough to build a sophisticated AI model for large languages from scratch.
According to research firm TrendForce, a model similar to OpenAI’s GPT would require more than 30,000 Nvidia A100 cards. But a handful can run complex machine learning tasks and improve existing AI models.
According to an electronics shopping website that lists around 40 A100 sellers, most were in Huaqiangbei’s electronics division. But there were also listings for A100 on Alibaba’s Taobao e-commerce site (9988.HK), Instagram-like Xiaohongshu, and Douyin, the Chinese version of TikTok.
Alibaba, Xiaohongshu and Douyin owner ByteDance did not respond to requests for comment.
Some of the vendors warned that fraud in issuing refurbished chips as A100 chips was commonplace.
Nvidia’s more advanced H100 chips, which have only been on the market since March, appear to be significantly harder to come by.
Vinci Chow, an economics lecturer at the Chinese University of Hong Kong, whose department procured four A100 cards from local vendors for research purposes, said he was told some packs of eight H100 chips were available for purchase. But only one of the 10 vendors Portal spoke to said they could source H100.
The US probably isn’t too worried about small transactions in the chips, said Charlie Chai, a Shanghai-based analyst at 86Research.
“Only when China poses a bigger threat, after a significant catch-up process, will we see tighter enforcement,” he said.
He added that the premiums currently being earned by Chinese suppliers for A100 and H100 chips could collapse in the future as many of the Chinese AI startups that have been driving the purchases will eventually exit the market.
($1 = 7.8307 Hong Kong dollars)
Reporting by Josh Ye in Hong Kong, David Kirton in Shenzhen and Chen Lin in Singapore; Additional reporting by Fanny Potkin in Singapore; Adaptation by Brenda Goh and Edwina Gibbs
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