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U.S. Forces Intel to Pause Shipments to Leading Server Maker

(Image credit: Intel)

According to a report from Globaltimes.cn, Intel has suspended shipments to Inspur, and the company supplied us with a more in-depth statement. Inspur is the world's #3 server vendor overall, and the largest supplier of servers in China. The suspension comes in the wake of Inspur's addition to a list released by the U.S. government this week outlining 20 companies it says are controlled by the Chinese military (PLA), portending swift regulatory action to block those companies from obtaining critical U.S. technologies.

We pinged Intel about the report of suspended shipments to Inspur, and the company provided the following statement to Tom's Hardware:

"We have temporarily paused shipments to one customer in order ensure compliance with U.S. Government export regulations. This is a temporary pause expected to last less than two weeks for some items, and others will resume in a matter of days. We will resume shipments as soon as we can do so while ensuring compliance with U.S. law."- Intel statement.

It's noteworthy that Intel did not name Inspur specifically, likely in keeping with its traditional practice of not speaking directly about its supply to end customers. However, the statement was provided in response to our query about the reports of suspended Inspur shipments, so the implication is clear.

Intel says it plans to resume shipments on 'some' items within two weeks, and 'others' within a matter of days, but we've reached out to clarify if all of the impacted products will resume shipping. Most of the US government restrictions apply to critical IP that it wishes to keep out of the hands of the Chinese military, so it's unclear how quickly Intel can earn an exemption and/or license for all of its products. Intel undoubtedly has a team of lawyers formulating a plan, though.

While most of the attention has been focused on the U.S. government's restrictions on Huawei, Inspur is a much more important company in the server market. Inspur is certainly not a household name, but according to IDC, the company ranked #3 in total global server shipments during 2019, and was, by far, the the #1 supplier of both A.I. and traditional servers in China, both of which represent key revenue generators for Intel in the world's fastest-growing market (more than 50% of Intel's revenue now comes from its data center businesses).

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(Image credit: IDC via Inspur)
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(Image credit: IDC via CRN.com)

The US government has tightened restrictions on Chinese companies as the trade war has unfolded, including adding AMD joint venture THATIC to the entity list. Still, companies can apply for a license to sell some tech to Chinese customers despite those restrictions. According to the latest data, it doesn't appear that AMD has resumed operations with THATIC under a new license. 

(Image credit: Inspur)

Inspur's sales span the globe, and the company has largely been an Intel-only shop, meaning it only sells servers with Intel CPUs inside. As such, the impact of the Inspur export restrictions on AMD will likely be minimal. However, Inspur does have plans to produce GA100 servers with Nvidia's new architecture, and it remains unclear if those SKUs have the option to come with AMD processors (Nvidia has reference designs both with and without AMD processors).

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(Image credit: IDC)
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(Image credit: IDC)

Inspur also sells a bevy of Open Compute Project (OCP) servers that are favored by the world's largest hyperscalers. Most of its China business has focused on leading Chinese players Tencent, Baidu, and Alibaba, which are among the fastest-growing cloud service providers in the world. Inspur also does business in the ODM Direct market, which IDC predicts comprises 25.9% of worldwide server sales, but we don't have access to numbers that outline Inspur's share of that market segment.

The global supply chain is likely to see more upheaval beyond the recent new list of companies that the US government has banned, as the Trump administration announced yesterday that it will extend restrictions to Hong Kong, which has long been a safe haven and gateway between China and the rest of the tech world. 

The financial impact of the pause to Intel's deliveries is unclear, but we will update as we learn more.

  • cfbcfb
    Seems those in charge didn't notice that China is making its own x86 chips, server boards. etc. Big loss to Intel and the US. Not even going to make China blink when they use their own for less.
    Reply
  • Zizo007
    Time to switch to AMD?
    Reply
  • Deicidium369
    IF they are making Intel stop what makes you think that AMD is an option. The issue is that Inspur is a Chinese company - not anything to do with Intel,
    Reply
  • Nick_C
    While the US can block x86 chip sales to China (because Intel and AMD are US companies), I doubt the same can be said of ARM chips - as ARM is owned by a Japanese company. We could see an acceleration towards ARM based servers due to unilateral measures taken by the US - and that would very likely have a negative effect on the earnings of those US companies affected by the export ban.
    Reply
  • Zarax
    This will likely accelerate local investments in Zhaoxin, we might end up with a competent 3rd CPU player in the x86 market in less than 5 years.
    Reply
  • mradr
    While China is making its own chips now - it is years away from the same level as AMD and Intel. Even if they're on the same node - small samples that make it out shows that its no where near the same performance as the big companies. ARM on the other hand could see its play in this market grow, but Japan is not happy with China either as other countries grow more and more stern on putting pressure on China to make changes to fit the world economy.
    Reply
  • Deicidium369
    Nick_C said:
    While the US can block x86 chip sales to China (because Intel and AMD are US companies), I doubt the same can be said of ARM chips - as ARM is owned by a Japanese company. We could see an acceleration towards ARM based servers due to unilateral measures taken by the US - and that would very likely have a negative effect on the earnings of those US companies affected by the export ban.
    The largest market outside of the US is China - they have already stolen and bought IP from AMD. So they will not be moving to ARM. The US can obviously buy Intel - so no pressure to move or accelerate the move to ARM - eventually one of the many many failed attempts at a viable ARM server chip may produce something usable - but will not supplant Intel or the trillions of lines of code written for it.

    This is all a ruse. What Trumpo plans on doing in September or October is announce that the "Trade War" with China is over, and that he single handedly brought the Chinese to the bargaining table and got an amazing deal... But this from a man who thinks that when he placed tariffs on China, that China was sending the US Treasury $$$... At any rate, it will all end on January 20th 2021 a little after noon.
    Reply
  • bwohl
    I agree, China goes backward without x86 chips. People think ARM? Japan hates China thanks to WW2 and the South China Sea encroachments. Our great President has challenged the CCP for the benefit of future America. The intellectual theft
    expanded under the Obama admin.
    I’ll meet you here Jan 20th at 6pm EST - I work for a living.
    Reply
  • Bobby Max
    lmao what? I can't tell if what you just said is a horrible troll post or just terribly biased/misinformed. Japan hates China for WWII now? For what? Being a total pushover and getting invaded and mascred so easily? Do the Germans also hate the french, Poland and the netherlands for getting invaded and occupied so easily too in WWII?

    I seriously doubt the these multinational conglomerates care about geopolitical tensions and would do business in a heartbeat if it weren't for federal governments watching their backs
    Reply
  • outsider2k21
    bwohl said:
    I agree, China goes backward without x86 chips. People think ARM? Japan hates China thanks to WW2 and the South China Sea encroachments. Our great President has challenged the CCP for the benefit of future America. The intellectual theft
    expanded under the Obama admin.
    I’ll meet you here Jan 20th at 6pm EST - I work for a living.

    WTH . Japan hates China thanks to WW2?... Dude.. you need to check history.. Japan is part of Axis poweres in WW2. It is the other way around that China hates Japan as Japan invaded China in WW2.
    Reply