The U..S. decision to add Inspur Group to a trade blacklist will constrain China’s progress in artificial intelligence (AI) as the company provides over half of AI servers in the domestic market, according to Chinese analysts. Inspur, the world’s second-largest AI server manufacturer, is one of 28 Chinese entities being added to the U.S. Commerce Department’s Entity List, along with genetics firm BGI, chip developer Loongson, and AI unicorn 4Paradigm, due to alleged activities contrary to U.S. national security and foreign policy interests. Shares in Inspur's listed units dropped after the news. Inspur was originally at risk of being sanctioned by the U.S. in 2020 when it was included in a list of 20 Chinese companies alleged to have links with China’s military, according to the U.S. Department of Defense. Intel briefly suspended shipments to Inspur in June 2020 but they were later resumed when it emerged the company had not been sanctioned.
The addition of Inspur to the Entity List means that the Shandong-based company will find it increasingly hard to source key components from U.S. suppliers, a move that will severely hinder the country’s development of computing power. For example, Inspur is a key supplier of AI servers to Baidu.com, the search engine giant that is betting big on China-style ChatGPT services. Inspur has also signed strategic partnerships with Alibaba Cloud and Tencent Holdings, and its servers are also used by China’s key infrastructure providers such as China Mobile. Xiang Ligang, Founder of Beijing-based telecoms-focused information portal CCTime.com, said the sanctioning of Inspur is a clear sign that the U.S. wants to deal a blow to China’s computing power. “Inspur is a very important server company. The U.S. is trying to contain China’s rise in computing power,” said Xiang.
A lack of advanced chips from U.S. suppliers such as Nvidia and Intel could be a particular problem for Inspur. In its 2019 annual report, which is the last time Inspur disclosed its top suppliers, Nvidia was ranked No 2 among its top five suppliers, accounting for nearly 8% of its purchasing budget that year. Jason Jia, Beijing-based lawyer at Zhong Lun, said that being added to the trade sanctions list will have a significant impact on a company that uses technology – from software to hardware – sourced from U.S.-related supply chains. Computing power and data resources are two of the most critical tools when it comes to advancing AI, according to Liu Jingfeng, Senior Researcher at Beijing-based technology think tank Jazzyear, the South China Morning Post reports.
