Tech war: strong demand in China for advanced chips used on AI projects creates growing market for smuggled Nvidia GPUs, despite US ban

China’s massive demand for advanced semiconductors to power new artificial intelligence (AI) development projects has created a fast-growing market for smuggled graphics processing units (GPUs), such as the A100 and H100 devices from Nvidia Corp, according to industry insiders.

It is an under-the-counter trade that has apparently prospered, despite a US government ban imposed last August on the export to China of certain products from chip suppliers Advanced Micro Devices (AMD) and Nvidia, which has a near monopoly on GPUs used to train AI systems.

A Shanghai-based semiconductor engineer surnamed Tang said sourcing smuggled GPUs has become a big moneymaking enterprise because of strong domestic demand for Nvidia’s A100 and H100 GPUs. He is among thousands of unofficial intermediaries sourcing Nvidia’s high-end GPUs to meet the demand from various Chinese tech firms now developing ChatGPT-like services.

On social media platform Douyin, the Chinese version of TikTok, a number of vendors are offering Nvidia GPUs, although it is difficult to verify whether they have access to the much in-demand A100 and H100 products.

One vendor at Shenzhen subdistrict Huaqiangbei, home to the world’s biggest electronics wholesale market, claimed he was able to source Nvidia’s A100 and charged 128,000 yuan (US$17,709), which is above the manufacturer’s suggested retail price of about US$10,000.