DIGITAL LIFE

US investigates whether DeepSeek obtained Nvidia chips through Singapore to bypass restrictions

Singapore has found itself at the center of an investigation into the distribution of Nvidia's advanced semiconductors. The inquiry comes as Washington examines whether Chinese AI startup DeepSeek has been acquiring chips through the Southeast Asian nation, potentially circumventing US export controls.

Singapore's Second Minister for Trade and Industry, Tan See Leng, addressed the issue in a statement to lawmakers. According to Tan, while Nvidia reported that 22 percent of its sales in the August-October 2023 period were attributed to Singapore, this figure primarily reflects billing practices rather than physical product delivery.

Tan emphasized that the actual physical delivery of Nvidia products to Singapore represents less than one percent of Nvidia's overall revenue for the three-month period ending in October 2023. These deliveries were primarily for major enterprises and government use within Singapore.

The discrepancy between billing attribution and physical delivery is not unique to Nvidia or Singapore. Tan explained that it is common practice for global entities to centralize billing for procured goods and services in their hubs, separate from where products are shipped. This strategy allows multinational companies operating across borders to streamline their financial operations, often billing everything through their headquarters address while shipping items directly to where they're needed.

Nvidia has long acknowledged this practice in its financial reporting, stating that revenue by geographic area is based on the billing location of the customer, which may differ from the end customer and shipping location.

Singapore's position in this matter is particularly sensitive due to its close ties with both China and the United States. The country has become a hub for many Chinese tech companies, including ByteDance's TikTok, which has its headquarters in Singapore.

Meanwhile, Singapore considers the US a key strategic partner in trade and politics, with significant military cooperation. The ongoing US-China trade tensions and technology restrictions have put Singapore in a challenging position. The country is keen to maintain its reputation as a business-friendly hub while also complying with international regulations and export controls.

In response to the allegations surrounding DeepSeek's acquisition of Nvidia chips, Tan assured that the Singapore government is cooperating fully with US authorities to investigate the matter. He emphasized that Singapore does not condone any businesses using their Singaporean address to circumvent export controls set by other countries.

The investigation comes in the wake of DeepSeek's release of a chatbot called R1, which has demonstrated capabilities comparable to US-developed tools. This development has raised questions about China's progress in AI technology and whether this progress has relied on Western technology.

In fact, Nvidia itself has long said, "Revenue by geographic area is based upon the billing location of the customer. The end customer and shipping location may be different from our customer’s billing location. For example, most shipments associated with Singapore revenue were to locations other than Singapore and shipments to Singapore were insignificant."

However, Singapore is closely tied to China — especially in business. This is especially true in the tech sector, where many Chinese companies have set up key offices on the island. For example, TikTok, which Chinese tech giant ByteDance owns, has its headquarters in the country, and its CEO is also Singaporean. Despite that, the country also considers the U.S. to be a key strategic partner, both in trade and politics, with the two countries’ militaries even allowed to use each other’s facilities on the island and in Guam.

The country has to carefully balance its relationship with China and the United States, especially as the countries are currently engaged in a trade war with various bans and sanctions taking effect in recent years. Singapore likely doesn’t want to be put on Washington’s entity list, especially as it considers itself a business-friendly country, and getting on that list means it will have several limitations put on it, especially in the tech space. Because of this, Tan said that the Singapore government is working closely with U.S. authorities to investigate this discrepancy and that the country does not condone any business using their Singaporean address to get around export controls set by other countries.

mundophone