[News] China Reportedly Collaborates with Tech Giants through Front Companies to Avoid U.S. Sanctions on AI

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Amid the heating tech war between the U.S. and China, and the stringent sanctions imposed to prevent China from obtaining cutting-edge chips, it appears that China is still able to find its way out. According to a report by Tom’s Hardware, citing the New York Times, the latest tactic of China would be setting up new companies to trade advanced hardware and operating them until they are shut down.

Before that, it is understood that Chinese firms have been smuggling NVIDIA chips through some underground networks, which involve buyers, sellers and dispatchers, according to a previous report by the Wall Street Journals.

Now the country seems to find another option in order to evade the sanctions. According to the New York Times and Tom’s Hardware, buyers that include state-owned or affiliated companies, even sanctioned companies, are reportedly collaborating with the Chinese defense industry, as transactions ranging from a few hundreds of GPUs to a deal worth USD 103 million have been observed lately.

The new tactic, it is reported, would be to establish new companies to acquire advanced chips before facing U.S. sanctions. For instance, after Sugon, established under the strong promotion of the Chinese Academy of Sciences and focuses on fields like computing, storage, security and data center, was banned from obtaining NVIDIA chips due to its ties with the Chinese military, some former executives created a new company named Nettrix.

The reports further note that within six months, Nettrix became one of the largest Chinese manufacturers of AI servers, as tech giants including NVIDIA, Intel, and Microsoft have already begun doing business with it, all without violating any American laws. Given the company’s recent establishment, the U.S. likely hasn’t had the opportunity to thoroughly vet its background.

The reports suggest that the White House might significantly reduce Chinese backdoors in trade by ensuring that only licensed, white-listed buyers can legally procure these chips. However, many in the industry oppose increasingly stringent bans, arguing that they harm American companies more than they help.

Before the upcoming U.S. presidential election in November, the Biden authority is said to be considering a series of actions targeting semiconductors. The latest one includes new measures that might unilaterally impose restrictions on China as early as late August, preventing major memory manufacturers like Micron, SK hynix, and Samsung Electronics from selling high-bandwidth memory (HBM) to China.

• [News] US Reportedly Weighs Stricter Limits on AI Memory Access for China
• [News] China Reportedly Acquires Nvidia AI Chips Indirectly; Nvidia, Gigabyte Emphasize Compliance with U.S. Regulations

(Photo credit: Nettrix)