Inspur warns of profit plunge as sanctions bite

Cites 'tight supply' of certain silicon – the sort of stuff that makes servers interesting

Chinese server-maker to the stars, Inspur, has warned investors that it will soon reveal an ugly set of numbers.

A Tuesday filing with the Shenzhen Stock Exchange offers interim guidance for H1 of 2023 and the news isn't great: a predicted fall in profit of between 60 and 70 percent, and a revenue drop of around 30 percent.

The manufacturing giant has cited "tight supply of global GPUs and related special-purpose chips" among the reasons for the dip.

Which appears to be a polite way of saying that sanctions are biting. The US added Inspur to its export ban list in March 2023. Authorities then followed up with bans on associate entities to make sure Inspur couldn't find a way around sanctions.

While Inspur has plenty of local customers, it's also a known provider of custom servers for global hyperscalers and has built kit for the likes of IBM and Cisco.

But if sanctions mean it can't get its hands on Xeons, Epycs, and Nvidia accelerators, plenty of customers will have to look elsewhere.

Investors were spooked by that prospect, sending Inspur's share price down ten points. It's since recovered to the same level as earlier this week, and indeed is almost fifty points higher than it was when Inspur was first added to the sanctions list.

The builder earned its place there "for acquiring and attempting to acquire US-origin items in support of China's military modernization efforts."

Inspur’s woes are probably good news for the likes of Dell, HPE, and Lenovo – all of which know how to build the same sort of boxes, have teams that serve hyperscalers, and face only conventional supply chain challenges.

Of course those three also can't ship banned parts into China. But they can ship them elsewhere and Inspur can't – meaning a formidable competitor is out of the game. ®

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