China's Inspur Group caught exporting AI chips via Southeast Asia to avoid US sanctions

(Seoul = Yonhap News) Reporter Lee Shin-young = Circumstances have been discovered that Inspur Group, a Chinese artificial intelligence (AI) server construction company on the US sanctions list, is evading export regulations by abusing its subsidiaries in the US.

The American daily New York Times (NYT) reviewed and analyzed thousands of shipment records and supply contracts on the 6th (local time) and reported how Chinese companies are using computing power using advanced American AI chips to avoid U.S. regulations.

According to the NYT, Inspur, which has been building AI servers by receiving semiconductor chips from Nvidia and others, was subject to export restrictions by the U.S. Department of Commerce in March 2023.

This is because they attempted to secure American technology to produce a Chinese military supercomputer.

Inspur then explored loopholes in export regulations through its subsidiary 'iBreath', which was not included in the regulation.

The United States banned the export of Nvidia's cutting-edge AI chips to China.

Then, they found a new way to first send Nvidia AI chips to Southeast Asia, which is not subject to export restrictions, and set up a data center there, allowing domestic customers to access and use them from afar.

This was aimed at the fact that the United States has almost no way to monitor and block Chinese companies from remotely accessing AI centers located in Southeast Asia.

According to NYT's analysis of trade records, from April 2024 to February this year, iBreath exported at least $5.6 billion (about 7.5 trillion won) worth of high-tech equipment from the United States to Southeast Asia.

Of these, more than $3 billion (approximately 4 trillion won) were computers equipped with NVIDIA's Blackwell.

The equipment exported in this way was supplied to data centers in Southeast Asia that provide services to large Chinese technology companies such as Alibaba and ByteDance, which are at the forefront of AI utilization.

Megaspeed, a Chinese company that has been under investigation by the United States for allegedly smuggling cutting-edge chips subject to export restrictions to China, is also included as a supplier to iBreath.

Circumstances were also detected that the AI ​​server was transferred to China via Malaysia and other countries through Inspur's global subsidiary network.

According to trade data company 'Import Genius', 'MagInfra', a new company established in China last year, imported more than $700 million (about 940 billion won) worth of servers into China from Malaysian companies that do business with Inspur affiliates over the past six months.

Although it is not possible to confirm on paper whether the imported servers are equipped with Nvidia chips, considering the unit price of delivery, it is estimated that more than 1,500 servers are state-of-the-art.

Although MagInfra's connection with Inspur was not confirmed on paper, it was revealed that the legal representative of the parent company had held a position at an Inspur subsidiary.

In particular, the Chinese office is located near Inspur's headquarters, and when NYT visited the site, it was confirmed that this office was a fake address with no employees.

According to Chinese procurement records, the servers imported by MagInfra were supplied to Chinese universities and state-owned enterprises.

“It is very difficult to see this situation as not being a network operated with the support of the Chinese government to evade export controls,” said William George, research director at Import Genius.

The NYT pointed out that iBreath shares the same servers, employees, and offices as Inspur, but has not been regulated by federal authorities.

Federal authorities have begun investigating the status of Inspur's subsidiaries, but have not yet produced significant results.