Developers and companies are finding Nvidia AI chips cheaper to rent in China than in the US where the company is headquartered. The lower prices are reportedly a reflection of the steady supply of Nvidia chips in the Asian country, where the chips are supplied by small cloud vendors.
This development shows that the US decision to restrict the sale of Nvidia processors to China in 2022 did not do enough to stop the flow of processors into the country. It has only given rise to merchants in Hong Kong, Japan, and other countries near China, who buy from the US and smuggle them across the border.
Nvidia AI chips easily accessible in the market
According to the Financial Times, about four Chinese startup cloud entrepreneurs charge around $6 an hour for people to access a server with eight Nvidia A100 processors, while the same service costs $10 in the US.
Some sources cited by the publication who preferred to remain anonymous revealed that most of these units find their way into the Chinese markets through smuggling. This has given rise to a cloud black market.
“The big players have to think about compliance, so they are at a disadvantage. They don’t want to use smuggled chips,” said the source.
Industry estimates say there could be 100,000 Nvidia H100 processors, which are core components for most AI systems. Most are imported from Japan through unregulated channels. Chip sellers and startups in China maintained the chips were easy to access in the country via the black market.
According to the Financial Times report, inventories of the A100 and H100 are advertised on social media and e-commerce platforms in China, such as Xiaohongshu, Alibaba’s Taobao, and electronics markets, at a smaller markup than prices abroad.
However, large cloud service providers in China, like Alibaba and ByteDance, known for their security and reliability charge 100% more or up to 400% above the price that smaller vendors charge for the same Nvidia A100 servers.
Salespeople who also spoke to the Financial Times revealed that Nvidia’s H100 plug-in cards in Shenzhen’s Huaqiangbei electronic market cost the equivalent of $23,000 to $30,000. Online sellers charge about $30,000 to $33,000 for the same.
Nvidia insists it only distributes to authorized partners
Nvidia, however, still argues that it has control over where its products end up as it distributes through a network of well-known partners who work with the company to ensure all sales are done in a manner that complies with the US export restrictions.
“Our pre-owned products are available through many second-hand channels,” said the chip-making firm.
“Although we cannot track products after they are sold, if we determine that any customer is violating US export controls, we will take appropriate action,”
Nvidia.
It appears the Chinese environment allows for lower prices as the operational costs are not as high as in the US.
“Engineers are cheap, power is cheap, and competition is fierce,” a vendor told Financial Times.
The United States has been trying to slow down China’s AI progression through a variety of measures, including export restrictions. However, this has not helped in any way, besides slapping a premium on the components entering China through back-end channels, which has created a thriving black market for Nvidia hardware in China.
Apart from the availability of the chips on the black market, executives of Chinese firms have found another way to dodge the restrictions. While subsidiaries of Chinese firms are barred from accessing the advanced AI chips, their executives have been establishing new companies in countries like Malaysia or Japan and acquiring these chips through those companies.
Source: https://www.cryptopolitan.com/nvidia-ai-chips-are-cheaper-in-china/