Nvidia Halves Its List of Authorized Buyers in Asia to Combat Smuggling into China

The tightening of US export controls has led to a massive "purge" among the American chipmaker's partners in Asia. Young cloud providers have been hit the hardest.

Why Nvidia Took Radical Measures

Following a series of high-profile scandals involving sanctions evasion, Nvidia was forced to reassess its relationships with clients in Asia. According to the Financial Times, the company has slashed its list of trusted buyers for cutting-edge equipment by more than half in recent months.

The primary objective of this measure is to cut off illegal export channels of high-tech chips to China. The initiative comes directly from US authorities, who forced the vendor to overhaul its compliance procedures.

Vetting Process

The main blow fell on so-called neocloud companies, which are young startups that rent out cloud computing power. To regain their status as trusted partners, these firms will have to undergo a repeated, much stricter vetting process.

The new control regulations now include, among other things, on-site inspections and a detailed review of end-users.

Experts believe that previously restricted equipment was reaching China through intermediaries in Malaysia, Singapore, and Taiwan. The new measures are designed to completely block these supply chains.

Import Substitution Amid Growing Shortages

The restrictions have already exacerbated the shortage of American processors in the Chinese market. In response to the US actions, Chinese authorities push for technological independence. Local manufacturers have been ordered to triple their own chip production volumes by the end of this year.

Nevertheless, China's quick independence is hindered by a shortage of lithography equipment: local factories' access to advanced foreign semiconductor manufacturing technologies remains blocked by sanctions.