Nvidia chip prices soar in Asia as US export curbs and AI boom drive demand
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In the depths of Guanghua Digital Plaza, Taiwan’s largest electronics market, purchasing agents dashed from one store to another last October, sweeping Nvidia’s RTX 4090 graphics cards on to flatbed trolleys and leaving shelves empty of the premium chips.
The buyers unzipped fanny packs filled with wads of cash and paid millions of New Taiwan dollars for the goods, retailers who spoke to Nikkei Asia recalled.
“They are buying these to later resell them to areas that faced US restrictions at a much higher price,” one store owner in the market said, adding that graphics cards could be resold for three times the price across the strait. “They can just carry them to Hong Kong or other Chinese cities.”
Similar scenes have been playing out across the region, from computer vendors in Singapore and Vietnam to the Yongsan electronics market in South Korea. Nikkei Asia reporters in these areas all found severe shortages of the RTX 4090, with prices as much as 60 per cent higher compared with when the chip was launched just over a year ago.
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.
The RTX 4090 is designed for rendering images, such as in video games, but like other graphics cards can also be used to train artificial intelligence models. And it has become a hot commodity in Hong Kong and China since the US began restricting its shipment to Chinese customers.
The Biden administration introduced controls on exports of certain high-end chips to China in 2022 to curb the country’s advances in AI, critical for the Chinese military. Nvidia redesigned some of its most powerful products — the A100 and H100 — to lower their specs and bring them into compliance with those rules in order to continue doing business in China, where it makes 20 per cent of its revenue.
But last October, the US updated its rules to include chips redesigned for China, dubbed A800 and H800, as well as the RTX 4090.
Nvidia responded by again redesigning its chips to bring them into compliance with the latest rules. These latest chips are not yet available on the shelves, but Washington shows no signs of relenting in its approach.
“If you redesign a chip . . . that enables [China] to do AI, I’m going to control it the very next day,” US secretary of commerce Gina Raimondo warned technology companies last December.
The RTX 4090 is cheaper and less powerful than Nvidia’s top-end offerings, which cost tens of thousands of dollars each. It can normally be bought in computer DIY shops and other retailers and is intended more for gamers and hobbyists. But because it can also handle some AI training tasks, it has landed in the crosshairs of US export controls.
When it was originally released less than a year ago, the RTX 4090 came with an official price tag of $1,599. After October, Nikkei Asia found instances of it being sold in retail shops for as much as $2,541.
In Singapore, one computer parts merchant told Nikkei Asia that buyers from mainland China had caused a shortage of the RTX 4090 in the store. The supply of the graphics processor is still limited in the city-state more than three months after the updated US export controls were announced, vendors said.
In Ho Chi Minh City, computer shops that Nikkei Asia visited said RTX 4090 supplies in Vietnam had been depleted in the wake of the US curbs. “Because of China, we’re affected, too,” said Khuong, an employee at a major electronics retailer.
He told Nikkei Asia that some Chinese would-be buyers had requested the graphics cards, but his company was unable to fill the orders because supplies from its importer ran dry after October. The supplier is trying to source the cards from other countries, he said.
Back in Taipei’s Guanghua market, the rush led one retailer to change his sales policy: anyone wanting to purchase RTX 4090 chips could only buy them as part of a complete gaming system.
This proved to be little deterrent.
“They still came and bought more than 20 desktop computer sets just because of the RTX 4090 chips inside,” the retailer said. “They can tear them down to get the chips and still make a profit.” The computers were priced at up to $4,500, “and they were still eager to buy all of them on the shelves”.
The brisk trade in the RTX 4090 underlines the difficulty the US faces in stopping the flow of chips into China via small distributors and smugglers.
Electronics vendors in Hong Kong who spoke to Nikkei Asia from October to December said even Nvidia’s H100 and H800 chips were readily available, with waiting times of generally one week. That is despite the city being added to the US commerce department’s “foreign adversaries” list in 2021, joining the likes of Iran, North Korea and Russia as targets of harsh export controls.
The co-founder of a Hong Kong artificial intelligence start-up, speaking on the condition of anonymity, said the export controls had caused major setbacks for his company and procuring chips through normal channels had become too risky. As a last resort, the start-up has turned to acquiring them through an agent.
“The standard and correct paths don’t work any more,” the co-founder said. “It’s very complex and feels like I’m buying drugs.”
Just to the north in Shenzhen, Nikkei Asia visited the Huaqiangbei market, a global electronics sourcing centre.
Empty RTX 4090 boxes were on display at some of the shops, while vendors openly spoke about acquiring the blacklisted chips. Five vendors said they sold items on the export control list.
One said the trade in advanced chips still existed but had gone further underground after the US updated its restrictions last year. He added that the stock was brought into mainland China through a purchasing agent or shell companies set up overseas.
“There’s no stock right now, but it can take around three to four days to get it here,” he said.
The US started to weaponise export controls under the Trump administration.
In 2019 it put Huawei on the entity list, a trade blacklist, and several hundred more Chinese companies eventually followed.
To serve a company on the entity list, a supplier must apply for a licence from the commerce department for each product. For instance, Qualcomm is able to supply 4G processors to Huawei but not 5G chips. Intel and AMD have also received licences to supply some processors to Huawei.
The latest restrictions on AI chips are more pervasive, applying to whole countries rather than individual companies.
Lawyers advising companies on export controls and sanctions said it was not uncommon for items subject to export controls to find their way to targeted countries through trade diversions.
David Wolber at Gibson Dunn said one of the key goals of Washington’s export controls was to at least slow the development of China’s advanced AI capabilities relative to the US.
“Trade diversion and evasion are the key problems right now when it comes to export controls,” Wolber said.
“It’s clear this is one of the big problems when enforcing export controls, particularly for things like semiconductors, which are incorporated into all manner of end products used around the world and which themselves are small enough to personally hand-carry in small quantities or otherwise smuggle across borders,” he added.
Nazak Nikakhtar, a partner at Wiley Rein and a former under-secretary at the Department of Commerce, told Nikkei Asia that recent US rules were causing upheaval in the market because they were promulgated with little to no advance warning to the industry.
“When the government issues our rules, they are replete with loopholes,” she said. “The result is that we are increasing compliance costs [workarounds by industry] without truly and effectively curbing tech transfer to adversary nations.”
A Nikkei Asia investigation last year found that despite sanctions, US-made semiconductors were making their way to Russia through China and Hong Kong.
A version of this article was first published by Nikkei Asia on February 2. ©2024 Nikkei Inc. All rights reserved.
Comments