US tech firms grapple with latest curbs on China’s Inspur

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Inspur Group is the world’s third largest provider of servers used in cloud computing data centers.

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Nvidia Corp, Advanced Micro Devices Inc and other tech firms are trying to assess whether they should stop selling to divisions of China’s Inspur Group Ltd after it was added to the US export blacklist last week.

Last week, the United States added Inspur to its trade blacklist for allegedly purchasing US-origin goods in support of China’s efforts to modernize its military. The listing means companies cannot sell goods to Inspur, such as semiconductors made with US tools, unless they apply for and receive licenses, which will likely be denied.

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A US Department of Commerce spokesman told Reuters on Tuesday that it is “reviewing the entry on the Inspur Group Co Ltd entity list and will update it as necessary,” referring to the official name of the export blacklist.

AMD and Nvidia executives were asked about deals with Inspur Group Co Ltd at Monday’s investor conference. AMD has said it is seeking clarification on the rules.

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China-listed subsidiary Inspur had sales of almost $10 billion in 2021, and Inspur Group is the world’s third largest provider of servers used in data centers for cloud computing. Q3 2022, latest available.

But chip industry insiders and their consultants said the firms are trying to assess whether they should cut off supplies to Inspur subsidiaries, including Inspur Electronics Information Industry Co, which is not automatically subject to restrictions.

U.S. regulators may consider unlicensed shipments to that subsidiary as a listing violation last week if there is a risk that goods will move from the unlisted subsidiary to the listed parent. Inspur Electronics Information Industry Co has the same corporate address as the blacklisted parent company.

“Shipments to related entities are a ‘red flag’ due to the risk of diversion,” a Commerce Department spokesman said in a statement.

Inspur did not respond to a request for comment. Last week, a Chinese embassy official in Washington, DC, told Reuters that China was “strongly opposed” to blacklisting Inspur and 27 other companies for trade.

A Chinese foreign ministry spokesman also said last week that the US is “once again cracking down on Chinese companies under false pretenses and dishonest means.”

Inspur list is more strict

Dan Fisher-Owens, an export law attorney at Berliner Corcoran & Rowe who works with chip makers, said many of his clients have suspended deliveries to Inspur’s subsidiaries to assess the situation.

At an investor conference in San Francisco, California on Monday, Nvidia CFO Colette Kress said the company would be “very closely monitoring export controls” but did not comment on whether Nvidia had stopped deliveries to Inspur subsidiaries.

“We may be working with other partners,” Kress said. An Nvidia spokesperson declined to comment other than her remarks.

An AMD spokesperson did not respond to a request for additional comment regarding remarks made by AMD CTO Mark Papermaster at the same conference.

Inspur’s listing is even more restrictive than many other companies on the US Department of Commerce’s “entity list” and could be comparable to the restrictions placed on blacklisted Chinese telecommunications company Huawei Technologies, one person familiar with the matter said.

As with Huawei, the listing restricts the shipment of Inspur products, even if they are made in another country but using US technology. These products also cannot be transferred to Inspur’s subsidiaries if the blacklisted parent company is considered a party to the transaction in the broadest sense of the term, the person said.

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