Chinese companies that are blacklisted by the US are opting to rent US cloud technology instead of purchasing it and are receiving favorable rates for doing so

In recent times, the US has added an increasing number of Chinese companies to a blacklist that restricts their ability to engage in certain types of business with the US. Although many of these sanctions include a prohibition on purchasing technology, it appears that certain Chinese firms have discovered a way to circumvent them by leasing the necessary equipment, which is proving to be less expensive than anticipated.

As per a recent report by the Financial Times, Chinese AI companies are employing intermediaries and third-party vendors to access US chips, thereby rendering the sanctions against them rather ineffective. Companies in China that are targeted by the sanctions are either buying hardware through subsidiary firms or renting it through cloud service providers.

The report further suggests that Chinese state-supported voice recognition company iFlytek has been renting Nvidia A100 GPUs, whereas Hong Kong-based facial recognition firm SenseTime has been successful in acquiring prohibited technology via third parties.

Despite the sanctions, the pricing of chips in China does not appear to have been affected. Even with these workarounds, Chinese AI firms are obtaining favorable rates for the chips they require. The report highlights one firm that charges $10 per hour for access to eight A100 chips, or approximately 86% of the cost of AWS’s offering on P4D instances.

Although it is possible that the US may reconsider the bans and plug these gaps, Chinese home-grown chips have become more advanced and sophisticated as the country has been compelled to decrease its reliance on other nations. Consequently, US firms that continue to benefit from Chinese usage may experience negative consequences.