Renting cloud services using Nvidia’s artificial intelligence chip is cheaper in China than it is in the US. This shows that the advanced processors can easily reach the Chinese market, despite Washington’s export restrictions.
Companies and customers have reported that four small-scale Chinese cloud service providers charge local tech companies around $6 per hour for a server equipped with eight NvidiaA100 processors. US small cloud vendors charge around $10 per hour for the exact same setup.
According to those in the AI/cloud industry, the low prices are due to the abundance of Nvidia chip supply in China, and circumvention of US restrictions designed to block access to cutting edge technologies.
The A100 (and H100) are two of Nvidia’s most powerful AI acceleration devices, and they are used for training large language models, which power AI applications. Since autumn 2022, the Silicon Valley company is prohibited from shipping A100s to China and the H100 has never been permitted to be sold in the country.
The products are relatively easy to obtain, according to chip resellers and start-ups. Inventories for the A100 and H100 can be found on Chinese social media, e-commerce sites like Xiaohongshu, Alibaba’s Taobao and in electronic markets. Prices are slightly higher than overseas.
According to the pricing of the two operators as well as customers, China’s largest cloud operators, Alibaba and ByteDance – known for their reliability, security and stability – charge up to four times the price for Nvidia A100 server compared to smaller local vendors.
Both Chinese tech giants are offering packages at prices similar to Amazon Web Services which charges between $15 and $32 per hour. Alibaba and ByteDance have not responded to requests for comments.
The big players are at a competitive disadvantage because they have to consider compliance. “They don’t want smuggled chip,” said the founder of a Chinese startup. “Smaller sellers are less concerned.”
Based on the widespread availability of Nvidia processors, he estimated that there were over 100,000 Nvidia h100s in China. Each Nvidia chip is about the size of a small book. This makes it relatively easy for smugglers and criminals to smuggle them across borders.
“We bought two H100s this year from a company who smuggled the cards in from Japan,” said an automation start-up founder, who paid Rmb500,000 (roughly $70,000) for each card. “They etched away the serial numbers.”
Nvidia stated that it sold processors “primarily” to “well-known partners”. . . “We work closely with our partners to ensure that we comply with US export controls rules in all of our sales”.
The company said that “our pre-owned product are available in many second-hand channels.” We cannot track the products once they have been sold. However, if we find that a customer has violated US export controls we will take action.
The head of the small Chinese cloud vendor explained that low costs in China helped to offset higher prices providers paid for Nvidia processors smuggled. He said that “engineers are cheap, and power is cheap. And competition is fierce.”
Salespeople in Shenzhen’s Huaqiangbei electronic market quoted the equivalent of $23,000 to $30,000. Online sellers are quoting the equivalent of $31,000 to $33,000.
Dylan Patel, of SemiAnalysis, reports that Nvidia charges its customers between $20,000 and $23,000 for the H100 chip after recent price cuts.
A data centre vendor in China reported that servers from Silicon Valley’s Supermicro, fitted with eight H100 processors, reached a peak price of Rmb3.2mn in October after the Biden administration tightened restrictions on exports . The vendor said that prices have since dropped to Rmb2.5mn due to easing supply.
People involved in the industry said that merchants from Malaysia, Japan and Indonesia would often ship Supermicro servers or Nvidia processing units to Hong Kong prior to bringing them over the border to Shenzhen.
Experts said that the black market relies on hard-to-counterworkarounds to Washington’s export regulations.
While it is illegal for Chinese subsidiaries to buy advanced AI chips from outside of the country, their executives can set up new companies in Japan or Malaysia and make the purchase.
An American sanctions expert said that it is difficult to enforce export controls outside the US. “That’s the reason the regulations require the shipper to check on end users, and [the] Commerce [Department] adds firms believed to be violating the rules to the (banned entity list).
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