U.S. Government Prompts Nvidia to Investigate AI Chip Smuggling to China

US asks Nvidia to investigate how its chips ended up in China, The Information reports

(Reuters) -The U.S. Department of Commerce has recently asked Nvidia to look into how the company's products ended up in China over the past year, The Information reported on Thursday, citing a person close to the department. The chip giant has asked big distributors such as Super Micro Computer and Dell Technologies to conduct spot checks of their customers in Southeast Asia, the report said. Nvidia's artificial intelligence chips are embedded in server products made by Super Micro and Dell. The Information reported that five different people involved in smuggling Nvidia chips said they have managed so far to evade detection during recent inspections by Super Micro. Some of the customers duplicated serial numbers of the servers containing Nvidia chips that they purchased from Super Micro and attached them to other servers that they had access to, the report said citing a person close to Super Micro. In some cases, smugglers even altered the serial numbers in the operating system for the servers, the report said. "We insist that our customers and partners strictly adhere to all export control restrictions. Any unauthorized deviation of previously-owned products, including any grey market resales, would be a burden on our business, not a benefit," an Nvidia spokesperson said. Super Micro, Dell and the commerce department did not immediately respond to Reuters' requests for comment. The Joe Biden administration has doubled down on its chip crackdown in China. The U.S. broadened a ban on the sale of high-end AI chips to the country last year. Still, several Chinese universities and research institutes procured these Nvidia chips via resellers, a Reuters review of tender documents showed earlier in 2024. Earlier this month, the U.S. curbed semiconductor exports to 140 companies, including chip equipment makers. (Reporting by Deborah Sophia in Bengaluru; Editing by Shilpi Majumdar)

US prompts Nvidia probe into how chips ended up in China: reports

The chip giant has asked big distributors such as Super Micro Computer and Dell Technologies to conduct spot checks of their customers in Southeast Asia, the report said. Nvidia's artificial intelligence chips are embedded in server products made by Super Micro and Dell.The US Department of Commerce has recently asked Nvidia to look into how the company's products ended up in China over the past year, The Information reported on Thursday, citing a person close to the department. The chip giant has asked big distributors such as Super Micro Computer and Dell Technologies to conduct spot checks of their customers in Southeast Asia, the report said. Nvidia's artificial intelligence chips are embedded in server products made by Super Micro and Dell. The Information reported that five different people involved in smuggling Nvidia chips said they have managed so far to evade detection during recent inspections by Super Micro. "We insist that our customers and partners strictly adhere to all export control restrictions. Any unauthorized deviation of previously-owned products, including any grey market resales, would be a burden on our business, not a benefit," an Nvidia spokesperson said in an emailed response. Some of the customers duplicated serial numbers of the servers containing Nvidia chips that they purchased from Super Micro and attached them to other servers that they had access to, the report said, citing a person close to Super Micro. In some cases, smugglers even altered the serial numbers in the operating system for the servers, the report said. Dell said the company requires its distributors and resellers to follow all applicable regulations and export controls. The company added that it takes appropriate action "up to and including termination" of its relationship if a partner is not adhering to these obligations. Super Micro said it investigates and takes action against any unauthorized exports or re-exports of its products by third parties. "Supermicro follows all US export control requirements on the sale and export of GPU systems to regions and parties that require licenses under the Export Administration Regulations," the company told Reuters. The commerce department did not respond to a Reuters request for comment. The Joe Biden administration has doubled down on its chip crackdown in China. The U.S. broadened a ban on the sale of high-end AI chips to the country last year. Still, several Chinese universities and research institutes procured these Nvidia chips via resellers, a Reuters review of tender documents showed earlier in 2024. Earlier this month, the U.S. curbed semiconductor exports to 140 companies, including chip equipment makers.

Nvidia asked Supermicro and Dell how its advanced AI chips ended up in China

Nvidia has reportedly tapped its partners to look into how its advanced artificial intelligence chips are being smuggled into China. The chipmaker, which doesn't usually directly sell its chips to customers, has asked Supermicro and Dell to carry out spot checks on Southeast Asia-based customers to verify that they still have their Nvidia chip-equipped servers, The Information reported, citing an unnamed person close to the U.S. Department of Commerce who is familiar with the situation. An unnamed person close to Supermicro told the publication that chip smugglers use various methods -- including duplicating the serial numbers on Nvidia-equipped servers purchased from Supermicro then attaching them to other servers -- when anticipating inspections. Nvidia turned to Supermicro and Dell after it was reportedly asked by the U.S. Commerce Department to look into how its products have been smuggled into China -- a violation of U.S. export controls. As he prepares to leave office, President Joe Biden has introduced more restrictions on the sale of high-bandwidth memory and chipmaking tools to China. Five unnamed chip smugglers told The Information that they were not caught by Supermicro's recent inspections. "We insist that our customers and partners strictly adhere to all export control restrictions," an Nvidia spokesperson said in a statement shared with Quartz. "Any unauthorized deviation of previously-owned products, including any grey market resales, would be a burden on our business, not a benefit." Supermicro said it "follows all U.S. export control requirements on the sale and export" of chips, in a statement to The Information. "If we become aware that a third party has exported or reexported without the required licenses, we investigate and take appropriate action." A Dell spokesperson said it "maintains a strict trade compliance program and requires our distributors and resellers to follow all applicable regulations and export controls," in a statement shared with Quartz. "If a partner is not adhering to these obligations, we take swift and appropriate action, up to and including termination of our relationship." Supermicro did not immediately respond to a request for comment from Quartz. In August, the Wall Street Journal reported that Chinese AI engineers are working with brokers to use servers with Nvidia's AI chips that don't require physically bringing the banned chips into the country. Despite U.S. efforts to tighten export controls on advanced chipmaking equipment sold to China, the country's AI firms have reportedly been able to access advanced chips from Nvidia through resellers, and even by renting Nvidia-powered servers from Google, Microsoft, and other tech companies.

US government asks NVIDIA how its AI GPUs have ended up in China, skirting US sanctions

TL;DR: NVIDIA and Supermicro emphasize strict adherence to U.S. export control regulations, warning against unauthorized resale of products. They stress that any deviation from these rules could negatively impact their business. The US government has asked NVIDIA to investigate how its best AI chips are ending up in China, pushing the company to ask big distributors, to start spot checks on customers in Southeast Asia. In a new report from The Information and Reuters, we're learning that the US Department of Commerce is asking NVIDIA to look into how its chips are getting into China. NVIDIA was being pushed to ask its big distributors Dell and Super Micro Computer (SMC) to conduct spot checks on their customers in Southeast Asia, with The Information reporting that 5 different people involved in smuggling NVIDIA chips say they've so far managed to evade detection during recent inspections by Super Micro. An NVIDIA spokesperson told Reuters: "We insist that our customers and partners strictly adhere to all export control restrictions. Any unauthorized deviation of previously-owned products, including any grey market resales, would be a burden on our business, not a benefit". In some cases, customers duplicated the serial numbers of the servers powered by NVIDIA chips that they wanted to purchase from Super Micro, attaching them to other servers that they had access to according to the report citing a person close to Super Micro. In some cases, smugglers were changing the serial numbers in the operating system for the servers.

U.S. pressures Nvidia, SMCI to probe AI chip smuggling to China - The Information By Investing.com

Investing.com -- According to a report from The Information on Thursday, Nvidia (NASDAQ:NVDA) has turned to companies such as Super Micro Computer (NASDAQ:SMCI) in a bid to work out how its advanced artificial intelligence chips are finding their way to China in violation of U.S. export laws. The publication said Nvidia, which typically doesn't sell its chips directly to customers and relies on specialized dealers and server companies like Supermicro, recently asked Supermicro to perform spot checks of its customers in Southeast Asia. The region is said to be seen as a hot spot for chip smuggling to China. The checks are designed to verify that those customers still possess the servers equipped with Nvidia chips they bought, said The Information, citing a person close to the U.S. Department of Commerce, which is responsible for enforcing U.S. trade laws. The Information adds that a person close to Supermicro told them some of the company's customers have utilized "crafty tricks" that make it difficult to figure out if they have illegally resold Nvidia's chips to customers in China, such as duplicating the serial numbers of the servers with Nvidia chips purchased from SMCI and attaching them to other servers they had access to. Supermicro's checks are said to have come after the Commerce Department recently requested Nvidia investigate how the company's products are being smuggled into China over the past year. Nvidia has also reportedly asked Dell (NYSE:DELL) to audit its customers in Southeast Asia for the same reason. The Information adds that the inspections are continuing. However, they note that "five different people involved in smuggling Nvidia chips said they have managed so far to evade detection during recent inspections by Supermicro."