Yes, this is an entirely ridiculous policy.
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The DC blobs have gone off on the deep end and fully decided that AI chips are like military weapons.
so this probably restricts the legal sales of Nvidia GPUs (even the low end ones) to China to a certain fixed amount. I presume Huawei is thanking them for this since it has plenty of Ascend NPUs to sell.
But other than that, I'd assume the smuggling business through Japan, Korea, Singapore & Taiwan will continue to bring in plenty of Nvidia GPUs.
It does open up Ascend sales to non-US allied countries.