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

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

Nvidia Corp, Advanced Micro Devices Inc and other tech companies are scrambling to assess whether to halt sales of units from China’s Inspur Group Ltd after it was placed on a US export blacklist last week.

The United States added Inspur to its trade blacklist last week for allegedly acquiring items of American origin in support of China’s military modernization efforts. The listing means companies cannot sell items to Inspur, such as semiconductors made with US tools, unless they apply for and are granted licenses, which will likely be denied.

A spokesman for the US Department of Commerce told Reuters news agency on Tuesday that it is “reviewing the listing on the Entity List of Inspur Group Co Ltd and will update it as necessary,” referring to the official name of the export blacklist.

AMD and Nvidia executives were questioned Monday at an investor conference about dealings with Inspur Group Co Ltd. AMD said it was seeking clarification on the rules.

While not a household name, Inspur’s China-listed subsidiary had sales of nearly $10 billion in 2021 and Inspur Group is the world’s third-largest supplier of the servers used in data centers that power cloud computing, according to figures from market research firm IDC for the third quarter of 2022, the latest available.

But chip industry insiders and their advisers said companies are trying to assess whether to stop supplying Inspur’s subsidiaries, including Inspur Electronics Information Industry Co, which is not automatically subject to the restrictions.

U.S. regulators could consider unlicensed shipments to that subsidiary a violation of last week’s listing if there is a risk that the goods will move from the privately held subsidiary to the publicly traded parent. Inspur Electronics Information Industry Co has the same business address as the blacklisted parent company.

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

Inspur has not returned a request for comment. Last week, an official at the Chinese embassy in Washington, D.C. told Reuters that China was “firmly opposed” to placing Inspur and 27 other companies on the trade blacklist.

A spokesman for China’s foreign ministry also said last week that the US “unfairly cracks down on Chinese companies under false pretenses and by unfair means”.

Inspur list more restrictive

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

At an investor conference in San Francisco, California, Nvidia Chief Financial Officer Colette Kress said Monday that the company will “monitor export controls very closely,” but declined to comment on whether Nvidia has stopped shipping to Inspur subsidiaries.

“We will likely work with other partners,” Kress said. An Nvidia spokesperson declined to comment beyond her comments.

An AMD spokesperson did not respond to a request for additional comment on AMD Chief Technology Officer Mark Papermaster’s remarks made 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 similar to the restrictions placed on Huawei Technologies, China’s blacklisted telecommunications company, a spokesman said. person familiar with the matter.

As with Huawei, the list restricts the shipment of products to Inspur, even if they are made abroad but with US technology. Those products also cannot go to Inspur’s subsidiaries if the blacklisted parent is considered a party to the transaction under a broad definition of the term, the person said.