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Amid U.S. regulations on semiconductor exports to China, reports have emerged that Microsoft and Google have provided Nvidia AI chips to Chinese companies through their overseas data centers. They exploited a loophole by categorizing cloud computing as a service rather than a product, thus circumventing the U.S. government’s semiconductor export control list.
The Information, citing reliable sources, reported on Wednesday that Microsoft has been providing Chinese companies with server rental services. These services include servers equipped with Nvidia’s latest AI chips, the A100 and H100, and are facilitated through data centers established outside of China.
According to the report, Google has also permitted Chinese companies to use servers equipped with Nvidia’s latest chips in regions outside China. However, Google has stated that it complies with U.S. export control regulations.
Chinese AI startups are reportedly renting servers in the Asia-Pacific region from Google’s Google Cloud or Microsoft‘s Azure and using Nvidia’s A100 or H100 chips installed there.
For instance, at the end of last year, a Chinese AI startup in Shenzhen contacted Microsoft and Google to inquire about renting Nvidia chips from overseas data centers. Both companies reportedly confirmed it was possible, but the startup ultimately decided against using the service, citing the high cost.
The Biden administration strictly limits the export of advanced AI chips to China. However, cloud services that provide computing resources without actually exporting semiconductors to China are not subject to regulation.
It is possible to train AI by renting cloud servers from Google or Microsoft without importing Nvidia’s advanced AI chips.
The U.S. government has been aware of this loophole. In January, U.S. Secretary of Commerce Gina Raimondo expressed her concerns about China using U.S. cloud services to train AI models.
The U.S. Department of Commerce quickly applied new rules to U.S. cloud providers, introducing a rule that requires foreign companies to report to the government when using services for AI model training. However, these regulations are not applied to foreign cloud companies and overseas subsidiaries of U.S. companies, leading to criticism that their effectiveness is low.
Companies like Microsoft and Google and numerous cloud providers in Europe and Asia, including the Netherlands, France, and Singapore, also provide similar services, assisting Chinese companies circumventing U.S. export controls. However, it is pointed out that even if additional controls are implemented on U.S. companies, it would be difficult to prevent foreign companies from supporting Chinese companies.
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