Underground Market Thrives for High-End Chips in China After US Export Ban
China is experiencing a thriving underground market for top-end US graphics chips, highlighting the technological gap between the two superpowers. Despite the United States banning the export of Nvidia’s A100 and H100 chips in 2022 over national security concerns, small quantities of these high-priced components can still be found on various Chinese e-commerce platforms.
These graphics processing units (GPUs) are crucial for artificial intelligence (AI) applications and cost over $10,000. In China, demand for these chips has surged following the rollout of the highly intelligent chatbot, ChatGPT, in the US, as Chinese companies aim to develop their own versions.
The underground trade in these banned chips has flourished amidst speculation of further restrictions on powerful chips by the US. The ongoing tech rivalry between China and the US shows no signs of abating, with the US, Japan, and the Netherlands tightening the transfer of critical technology to China.
Checks by The Straits Times revealed numerous listings for high-end GPUs on Chinese e-commerce platforms like Xiaohongshu, Pinduoduo, and JD. However, these chips are often sold at inflated prices and come with dubious warranty status.
Some sellers, based in Shanghai and Guangdong, offered the A100 for 125,000 yuan (approximately $23,000) and the A800, a version with reduced capabilities, for 108,000 yuan. Warranty coverage is often uncertain for these unauthorized sales.
Nvidia’s GPUs are highly regarded in the industry and widely used in various applications, including laptops, data centers, and cars. The company’s market value briefly exceeded $1 trillion in May amid the surge in generative AI.
Nvidia neither confirmed nor denied media reports about potential additional government curbs on its chips. The company stated that it complies with all US government export restrictions and is working with Chinese customers to explore alternative products and license options where appropriate.
Electronics vendors in Shenzhen’s Huaqiangbei shopping street, known for its tech innovation, were quick to promote locally made alternatives when asked about the A100. These sellers cautioned that purchasing the A100 would carry a high risk of voiding the warranty, making domestically manufactured alternatives a safer choice.
However, the local options fall short in terms of raw processing power compared to the A100, although many customers find them satisfactory.
The ongoing chip war between the US and China is causing disruptions in the semiconductor industry, which had thrived due to its widespread globalization. The US has escalated the rivalry by restricting American firms from exporting tech used in advanced chip production to China. In January, Japan and the Netherlands joined this effort, and China subsequently banned Micron Technology from key infrastructure projects.
Semiconductor capabilities are considered vital for national security and economic prosperity, leading to a trend of nationalism in the industry. While it is believed that China may struggle to catch up in producing the most advanced chips in the short term, the country’s extensive investments suggest breakthroughs may occur eventually.
China’s ambition goes beyond manufacturing lower-end chips, as access to high-end chips is crucial for research and development in industries like AI, biochemicals, and new materials. The Chinese government is heavily investing in semiconductor development, driven by US actions to restrict chip technology exports.
As China strives for self-sufficiency in this strategic sector, breakthroughs are anticipated, owing to the significant financial and technological resources being dedicated to semiconductor development.
In conclusion, the thriving underground market for high-end US chips in China reflects the technological gap between the two superpowers and the ongoing tech rivalry. Despite US export bans, small quantities of these chips are available on Chinese e-commerce platforms. The chip war is causing upheaval in the semiconductor industry, with supply chains being reconfigured and a shift towards nationalism. While China may face challenges in catching up with the most advanced chips, its extensive investments indicate a determination to achieve breakthroughs in this strategically important sector.
