US plays Whac-A-Mole with Inspur subsidiaries to close China sanction loopholes

If your name's not on the entity list ... you're OK to do business with American companies

The US is tightening the net on Chinese server maker Inspur after its addition to the entity list of proscribed businesses, taking aim at the company's affiliates that may not be explicitly covered by the ban.

Inspur appears to be the new focus of Washington's campaign against Chinese tech companies following efforts that have previously targeted vendors such as Huawei and ZTE, chiefly for their involvement in supplying kit to western telecoms networks.

The China-based OEM and supplier of server kit to many hyperscalers was added to the entity list by the US Department of Commerce last week, meaning that American companies now need to obtain a special license from the department to do business with it.

However, those companies are still free to trade with Inspur's affiliates or subsidiaries, of which there are many. This is a loophole that Washington is seeking to close, according to Bloomberg, citing unnamed sources familiar with the matter.

The news agency said that until revised rules are published, American suppliers such as Nvidia are still free to trade with Inspur without getting explicit permission from the US government, although it may only take a matter of weeks for officials to address the oversight.

Earlier this week, Nvidia was named in a draft amendment to US Commerce Department licensing rules that seeks to end Trump-era exemptions allowing the sale of its products to Huawei.

On a potentially related note to Washington's moves against Inspur, the South China Morning Post reports that one of its subsidiaries, Inspur Electronic Information Industry Co., decided to relocate the address in which it is domiciled from the headquarters of the parent Inspur Group to a site about 2km away.

The entity is listed as "a China-based company principally engaged in the provision of cloud computing datacenter core products, solutions and services," and therefore appears to represent Inspur's chief line of business. Yet, according to SCMP, the company is separate from its parent group in legal terms, and therefore not on the entity list.

If this move to domicile at a different location is an attempt on Inspur's part to avoid US sanctions, it may well be in vain if Washington succeeds in blacklisting all of the group's subsidiaries.

But the crackdown on Inspur may also harm US companies. As The Register noted previously, the company enjoys close partnerships with a number of big US tech vendors, including joint ventures with IBM and Cisco.

At this point, it is unclear whether Inspur's affiliates or subsidiaries that are not currently on the entity list would have continued access to technology from US companies such as Nvidia's GPUs.

The US has already banned both Nvidia and AMD from selling some kit to China that could be used for AI workloads, but Chinese companies – including Inspur – had responded by swapping high-end devices like the A100 for the lower performing A800, while some have turned to renting high-end Nvidia GPUs via cloud providers.

AMD CTO Mark Papermaster told the Morgan Stanley Technology, Media and Telecom conference this week that his company was seeking clarification on the new US rules around Inspur, "as I think the rest of the industry is, because Inspur is a large holding company. It serves many markets."

Inspur is currently the world's third largest server maker. ®