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Nvidia ( NVDA ) not permitted to sell its most advanced chips to

China

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Some Nvidia AI GPUs in China have been heavily used,

leading to

higher failure rates

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US lawmakers have introduced bills designed to limit

smuggling

of Nvidia ( NVDA ) chips

By Che Pan and Casey Hall

BEIJING/SHANGHAI, July 25 (Reuters) - Demand in China

has begun surging for a business that, in theory, shouldn't

exist: the repair of advanced Nvidia ( NVDA ) artificial

intelligence chipsets that the U.S. has banned the export of to

its trade and tech rival.

Around a dozen boutique companies now offer repair services,

according to two such firms in the tech hub of Shenzhen which

say they predominantly fix Nvidia's ( NVDA ) H100 graphics processing

units (GPUs) that have somehow made their way to the country, as

well as A100 GPUs and a range of other chips.

Even before it was launched, the H100 was banned from sale

in China in September 2022 by U.S. authorities keen to rein in

Chinese technological development, particularly advances that

its military could use. Its predecessor, the A100, was also

banned at the same time after being on the market for over two

years.

"There is really significant repair demand," said a co-owner

of a firm that has been fixing Nvidia's ( NVDA ) gaming GPUs for 15 years

and began working on AI chips in late 2024.

Business has been so good that the owners created a new

company to handle those orders, which now repairs up to 500

Nvidia AI chips per month. Its facilities, as shown in social

media advertising, include a room which can accommodate 256

servers, simulating customers' data centre environments to

conduct testing and validate repairs.

The rapid growth of the repair industry from late last year

supports the view that there has been a significant amount of

smuggling of Nvidia ( NVDA ) chipsets into China. Tenders have shown that

the government and the military have made purchases of the U.S.

firm's banned AI chips.

Concern about large-scale smuggling of high-end Nvidia ( NVDA )

products into China has prompted both Republican and Democratic

lawmakers to introduce bills that would require the tracking of

chipsets so that their location can be verified after they are

sold. U.S. President Donald Trump's administration also backed

the idea this week.

The thriving repair industry also highlights how

Nvidia's ( NVDA ) advanced GPUs remain in high demand despite new, albeit

less powerful, products from Chinese tech giant Huawei

.

Though the buying, selling and repair of Nvidia GPUs is not

illegal in China, sources for this article were reluctant to

draw scrutiny from U.S. or Chinese authorities and declined to

be identified.

Nvidia ( NVDA ) cannot legally provide repair or replacement items

for restricted products in China. In contrast, sources said if

an Nvidia GPU in another nation has a defect and is under

warranty, which is normally three years, the company usually

replaces it.

An Nvidia ( NVDA ) spokesperson said only the company and authorised

partners "are able to provide the service and support that

customers need. Using restricted products without approved

hardware, software, and technical support is a nonstarter, both

technically and economically."

REPAIR DEMAND MAY NOT FADE

Nvidia ( NVDA ) has only just been allowed to recommence sales of its

H20 AI chipset, which has been specifically developed for China

to comply with U.S. restrictions. Switching over to H20 chipsets

is, however, not necessarily a simple or good option for Chinese

entities.

Price is an issue as one H20 server with eight GPUs inside

will likely cost more than 1 million yuan ($139,400), industry

sources say. H20 chipsets, which have increased memory

bandwidth, have been specifically designed for AI inference

work, but firms involved in the training of large language

models would likely prefer H100 chipsets which are better suited

to that task.

Industry sources said some of the H100 and A100 GPUs in

China have been crunching data around the clock for years now,

leading to an increase in failure rates. Depending on how

frequently a GPU is used and how often it is maintained, an

Nvidia GPU generally lasts two to five years before needing to

be repaired, they said.

According to the first source, his company charges between

10,000 yuan and 20,000 yuan ($1,400 to $2,800) to fix a GPU

depending on the complexity of the problem.

The second Shenzhen-based repair service provider - which

shifted from GPU rentals to repairs this year - says it can

repair up to 200 Nvidia AI chips each month, charging about 10%

of the GPUs' original selling price per repair.

Services generally include software testing, fan repair,

printed circuit board and GPU memory fault diagnostics and

repair, as well as the replacement of broken parts.

In the meantime, smuggling of high-end Nvidia ( NVDA ) chips

continues. Traders of chips in China say customer demand is

pivoting to top-of-the-line B200 chips which Nvidia ( NVDA ) began

shipping to other countries in larger quantities this year.

A server with eight B200 GPUs costs more than 3 million yuan

in China, they said.

($1 = 7.1724 Chinese yuan)