Media: Chinese AI firms sidestep export controls via cloud computing

Sanctioned Chinese AI companies are using rented computing power and cloud services to bypass U.S. export controls on chips. The Financial Times reports.

Unnamed employees of iFlytek, the voice-recognition systems developer placed on the sanctions list in 2019, told the publication that the company rents access to Nvidia A100 chips.

“iFlytek cannot buy chips, but that’s not a problem. It can rent them and train datasets on other companies’ computer clusters,” sources said.

According to the employees, renting proved costly but a viable alternative. Essentially, long-term use of chips is effectively equivalent to ownership, they added.

One of China’s largest AI startups, SenseTime, which is also under sanctions, purchased equipment directly through subsidiaries not listed on the U.S. blacklist.

Representatives say they “strictly comply with various laws and rules related to domestic and foreign trade.”

iFlytek did not respond to requests for comment.

According to a spokesperson for the U.S. Department of Commerce, the agency “is actively investigating possible violations but does not comment on specific allegations.”

A Washington export-control expert said U.S. rules do not extend to cloud providers, even if they use restricted chips. Violations would occur only if the technology were used to create weapons of mass destruction, he added.

According to a person close to iFlytek, U.S. restrictions have spurred the spread of state-backed computing clusters. They can accumulate Nvidia chips and rent access to the technologies to companies on the sanctions list.

A government official in Zhejiang confirmed that local authorities and companies are building AI computing centres that will allow sanctioned firms to continue operating.

A SenseTime source said the AI industry in China faces enormous risks from U.S. chip export controls. He said new restrictions could emerge soon.

“We must ensure that our supply chain and sales remain stable,” he added.

iFlytek and SenseTime were blacklisted for their alleged role in providing technology for state surveillance of Uyghur Muslims in Xinjiang.

In September 2022, the U.S. government restricted the supply of AI processors to China and Russia. Chips from Nvidia and AMD were among those banned.

In October, U.S. authorities published a new set of export-control measures.