Flying Hard Drives: China's Creative Workaround for US AI Chip Controls
Chinese AI companies circumvent US chip restrictions by transferring vast data volumes on conventional hard drives instead of GPUs, raising questions about why they don't opt for tape storage.
In today's digital era where data reigns supreme, China's innovative tactic of physically moving large AI datasets on hard drives offers an analog alternative.
Facing stricter US restrictions on obtaining advanced AI chips, primarily those manufactured by Nvidia, Chinese tech giants are treading off the beaten path.
According to reports, Chinese tech workers are now smuggling high-capacity hard drives—containing a whopping 4.8 petabytes of data intended for AI model training—into Malaysia. The Wall Street Journal revealed this intriguing revelation.*
Merging Bits and Pieces Despite Regulations
As U.S. regulations tighten on exporting high-end AI GPUs, Nvidia's chip sales to China have encountered hurdles. Although Nvidia insists there's no evidence of chip diversion, ground reports suggest a flourishing black market for illicit Nvidia GPUs.
These coveted chips are trickling in via Chinese subsidiaries stationed in neighboring countries. However, this approach is becoming riskier and costlier due to increased scrutiny and political pressure from Washington on these intermediary nations.
Adapt and Overcome: Data over Chips
As a result, these resourceful Chinese companies are strategically swapping chip imports with mass data exports. This complex, capital-intensive process involves careful planning of physical transportation and data distribution to evade customs.
Companies are also leasing GPU-rich servers in third-party nations like Malaysia to process their vast data influx. An instance involves a Chinese firm using its Singapore-registered subsidiary to inscribe a data center contract. However, the local Malaysian partner insisted on local registration to dodge regulatory pressure, as Singapore imposed its own tightened controls.
Despite the best efforts of US agencies, enforcement loopholes and logistical complexities continue to be exploited. Shifting vast quantities of data on hard drives emerges as a clandestine maneuver that outmaneuvers bandwidth limitations and digital surveillance.
High-end Hard Drives over Magnetic Tapes: Why the Preference?
While contemporary LTO-10 magnetic tapes can store up to 75TB compressed, hard drives appear to be the preferred option. The reasons are manifold:
- Speed and Efficiency: Hard drives provide faster data access and transfer compared to magnetic tapes, crucial for quick AI model training.
- Security and Control: Transporting data on hard drives guarantees a more secure, controlled method of data movement, eliminating the need for cloud services and their associated security risks and geopolitical constraints.
- Regulatory Compliance: The U.S.'s export controls on advanced chips used in AI applications make it challenging for Chinese companies to access these technologies within their borders. By physically moving datasets to train models on U.S.-made chips abroad, Chinese firms sidestep these restrictions while adhering to local data privacy laws.
- Geopolitical Considerations: The challenges of moving large datasets online, potentially subjected to customs scrutiny and delays, make physical transport a more viable choice in navigating geopolitical tensions and export restrictions.
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"Chinese tech workers are smuggling high-capacity hard drives, intended for AI model training, into Malaysia, as a workaround for stricter US restrictions on obtaining advanced AI chips, particularly those manufactured by Nvidia, due to data-and-cloud-computing technology's integral role in AI training,"
"In response to increased US scrutiny and political pressure on intermediary nations, Chinese companies are leasing GPU-rich servers in third-party nations like Malaysia and using high-end hard drives instead of magnetic tapes, due to their speed, security, regulatory compliance, and geopolitical considerations, for mass data exports as an alternative to chip imports."
