Chinese AI Companies Smuggle Hard Drives to Train Models in Malaysia

Chinese AI firms are smuggling hard drives to Malaysia to train models while evading U.S. chip restrictions. A group transported 4.8 petabytes of data using rented servers, navigating legal loopholes and customs. This reflects ongoing challenges for the U.S. in enforcing tech export controls as companies seek alternatives amid tight regulations.

In a peculiar twist in the world of tech and trade, Chinese AI companies are reportedly resorting to smuggling hard drives to Malaysia. The aim? To train their AI models without running afoul of U.S. restrictions on advanced Nvidia chips. The Wall Street Journal reports that four engineers made the trip from Beijing to Kuala Lumpur, each lugging along 15 hard drives stuffed with 80 terabytes of data. That’s a hefty 4.8 petabytes overall, enough to fuel several large-scale language models.

Planning this operation was no small feat; it took months of meticulous preparation. Sources indicate the engineers opted to physically transport the data on hard drives. Transferring such a massive volume online could invite unwelcome scrutiny. To further obscure their movements from customs, they split the hard drives among the four of them. Upon landing, they headed straight to a Malaysian data center to rent 300 Nvidia AI servers and get to work.

As if this wasn’t complicated enough, the involved firms took some crafty legal steps to keep things under wraps. Previously, the same Chinese AI company utilized that Malaysian center but through its Singaporean subsidiary. However, with Singapore tightening its grip on AI tech exports, the Malaysian firm had the Chinese client register locally to dodge the spotlight.

While this whole setup is more intricate than simply conducting operations in China, U.S. bans are squeezing the import of crucial hardware for AI training. Nvidia, for its part, insists there’s “no evidence of chip diversion,” yet a very viable black market for Nvidia chips exists in China, with suppliers exploiting loopholes through subsidiaries in neighboring countries.

Yet, it’s not a cheap endeavor. Those rising risks mean higher prices for the servers. Recently, due to mounting pressure from Washington, obtaining that needed hardware has become trickier. For many Chinese firms, exporting data instead of importing hardware has emerged as the go-to solution.

This situation shines a light on the challenges the U.S. faces in enforcing export restrictions on powerful chips. Adding further complexity, the U.S. Senate uncovered that the Commerce Department is sorely underfunded and struggles with enforcement effectiveness. While it seems sanctions are slowly starting to make waves, the lengths to which these Chinese companies go to sidestep AI chip limitations showcase how much work the White House has ahead of it.

In summary, the efforts by Chinese AI companies to smuggle hard drives into Malaysia reflect a significant workaround to U.S. chip restrictions. Despite the complexities and risks involved, these actions highlight the growing challenges the U.S. faces in enforcing its export controls. As Chinese companies find creative ways to bypass restrictions, the situation raises questions about the effectiveness of current policies and the impact of international competition in AI technology. It’s a tangled web indeed, revealing that where there’s a will, there’s definitely a way.

Original Source: www.tomshardware.com