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in december 2023, chaoxun equipment, a wholly-owned subsidiary of chaoxun communications (603322), signed a sales contract for nvidia gpu modules with jining high-tech ninghua big data co., ltd. (hereinafter referred to as "jining ninghua") for a total amount of rmb 472 million. to celebrate this cooperation, the leaders of both parties took a group photo at chaoxun communications, and chaoxun communications also shared this "good news" on its official weibo account.

but what chaoxun communications did not expect was that a few months later, this contract involved the company in a major dispute, and even led to the embarrassing situation of having its basic bank accounts frozen.

"offside" lawsuits from indirect downstream

in late july this year, without receiving any legal documents or lawsuits in advance, the financial staff of chaoxun communications suddenly discovered that the company's basic account opened at the guangzhou branch of industrial bank had been frozen.

it was not until august 9 that chaoxun communications and chaoxun equipment officially received the "civil complaint" delivered by the guangzhou intermediate people's court. the case was a "subrogation lawsuit" by creditors caused by a dispute over the transaction of nvidia h800 gpu modules between inspur software group co., ltd. (hereinafter referred to as "inspur software group") and jining ninghua. the freezing of chaoxun communications' bank account was also caused by this.

chaoxun communications emphasized in the relevant announcement that the company had no direct business dealings with inspur software group. so why did inspur software group sue chaoxun communications and chaoxun equipment?

back to the timeline of events. in december 2023, inspur software group and jining ninghua signed a "product purchase contract", stipulating that inspur software group will purchase 220 nvidia h800 gpu modules from jining ninghua, with a total contract price of 495 million yuan including tax, and pay a prepayment of 247.5 million yuan. the contract stipulates that jining ninghua should complete the supply before february 2, 2024.

when the delivery deadline came, jining ninghua did not deliver the goods on time, and inspur software group believed that the latter violated the contract and constituted a breach of contract. afterwards, inspur software group learned that chaoxun equipment was the upstream supplier of its transactions with jining ninghua, so it required chaoxun equipment to pay the advance payment and liquidated damages of 283 million yuan to inspur software group on its behalf.

in short, after inspur software group placed an order for gpu modules with jining ninghua, jining ninghua then placed an order with chaoxun equipment, but the goods were not delivered on time. inspur software group believed that it was chaoxun equipment's responsibility, so it filed a creditor's subrogation lawsuit with the court to recover the advance payment and liquidated damages.

since chaoxun communication is the sole shareholder of chaoxun equipment, inspur software group requires chaoxun communication to bear joint and several liability for chaoxun equipment's debts. based on the above reasons, inspur software group applied to the court for property preservation, requesting the seizure and freezing of chaoxun equipment and chaoxun communication's bank deposits of 283 million yuan or the seizure, detention and freezing of other properties of equal value.

since the accounts frozen by chaoxun communications are basic accounts, there has been a continuous inflow of funds during the freezing period. if the accounts cannot be unfrozen for a long time, it will pose a threat to the company's cash flow. therefore, chaoxun communications applied to the court for a change in property preservation, using the company's subsidiary equity and real estate for conversion and freezing in exchange for the unfreezing of the frozen accounts. on august 28, chaoxun communications announced that the relevant bank accounts had been unfrozen.

delivery of goods stuck in transit

looking back at the reasons why chaoxun communications and chaoxun equipment were sued, it was due to jining ninghua's failure to deliver goods to inspur software group on time. when inspur software group learned that chaoxun equipment was an upstream supplier of jining ninghua, it turned its attention to chaoxun equipment, thus "overstepping its authority" in the lawsuit.

in fact, chaoxun equipment is also a "middleman". according to an announcement disclosed by chaoxun communications in december 2023, the gpu modules that chaoxun equipment intends to purchase from a third-party company and provide to jining ninghua are the existing inventory of the third-party company (already in the country). the inventory was originally the company's early negotiation follow-up for the gansu qingyang intelligent computing center project. now that the project is still under construction, it is considered to be used for external sales first.

according to the contract between chaoxun equipment and jining ninghua, unless otherwise agreed, the gpu module product will be delivered within 6 weeks of chaoxun equipment receiving 50% of the advance payment from jining ninghua.

soon after, chaoxun equipment paid a prepayment of 225 million yuan to its upstream supplier. chaoxun communications said that due to the general shortage of gpu modules in the market and the large number and amount of gpu servers, the supplier would not ship the products until the prepayment was made.

how is the delivery performance of chaoxun equipment to jining ninghua? according to the latest announcement disclosed by chaoxun communications on august 15, as of now, chaoxun equipment has received 297 million yuan in payment from jining ninghua, and has cumulatively delivered 123 million yuan of nvidia h800 gpu modules and other products to it, and the relevant products have been accepted. the company will gradually complete the delivery of the remaining related equipment products to jining ninghua.

since the gpu module inventory had been confirmed to be in the country after previous negotiations, why has chaoxun equipment only delivered 123 million yuan worth of goods so far?

in response to this, a relevant person in charge of chaoxun communications responded in an interview with a reporter from the securities times that the main problem lies with the company's upstream suppliers. "at that time (at the end of 2023), the united states imposed export controls on nvidia's h800 gpu modules, which also caused a sharp rise in the domestic h800 gpu module inventory prices. based on this situation, upstream suppliers may have sold some of their inventory first. after all, there is still a delivery cycle in the contract with us, and they originally expected to obtain related products through other channels within the delivery cycle."

however, things went against expectations. the upstream supplier failed to successfully obtain the h800 gpu module, which made it difficult for chaoxun to continue delivering equipment to jining ninghua, which in turn triggered a series of chain reactions including jining ninghua's breach of contract and inspur software group's lawsuit.

negative attitude of middlemen

the reporter noticed that in the entire transaction chain, as a downstream customer of chaoxun equipment and an upstream supplier of inspur software group, jining ninghua’s identity as a "middleman" is very critical, but the company’s attitude seems somewhat ambiguous.

first of all, when the upstream supplier of chaoxun equipment was "stuck" and unable to deliver the goods to jining ninghua on schedule, what was jining ninghua's attitude?

according to the announcement of chaoxun communications, in june 2024, chaoxun equipment and jining ninghua signed a supplementary agreement on the previous sales contract, stipulating that the products provided by chaoxun equipment to jining ninghua will be changed from "nvidia h800 gpu module" to "nvidia h800 gpu module and other ai modules, ai server complete machines, ai products".

at that time, domestic gpus were also gradually rising. public information shows that chaoxun communications signed a cooperation agreement with domestic gpu manufacturer muxi in november 2023 and became the general agent of muxi gpu in a specific industry. chaoxun communications will complete the purchase performance target of 10,000 gpu products each year in 2024 and 2025 as the general agent of the industry.

combined with this supplementary agreement, it is not ruled out that jining ninghua accepted chaoxun equipment's adjustment and filling of some domestic gpu module products.

judging from the transaction between jining ninghua and inspur software group, jining ninghua's delivery deadline had expired as early as february this year. although inspur software group proposed to pay liquidated damages, it had never sued jining ninghua through legal means. it was only recently that it sued jining ninghua's upstream supplier chaoxun equipment.

according to a person in charge of chaoxun communications, until the company was sued by inspur software group, jining ninghua still had no intention to terminate the contract, and the two parties had no legal disputes, and the relevant contracts were still proceeding normally. but when chaoxun communications proposed to coordinate multiple parties to jointly resolve the lawsuit, jining ninghua showed an attitude of evasion.

public information shows that the actual controller of jining ninghua is the jining high-tech zone state-owned capital management office, while inspur software group is a subsidiary of inspur group, and its actual controller is the state-owned assets supervision and administration commission of shandong province. it should be noted that inspur software group and the listed company inspur software are not the same company, but affiliated companies under the same actual controller.

whose responsibility is it?

the relevant person in charge of chaoxun communications told the securities times reporter that after learning that it was sued by inspur software group, the company sent two executives to the headquarters of inspur software group overnight to seek a solution. however, the other party only sent a lawyer to communicate with them, and their attitude was extremely tough, saying "refund the money first and talk later." the two executives did not even meet any executives of inspur software group during the three-day wait, and finally returned empty-handed.

in the opinion of the above-mentioned person in charge, this matter is essentially a dispute between inspur software group and jining ninghua, and inspur software group's application for subrogation lawsuit against chaoxun equipment does not conform to normal business logic. "inspur software group also asked us to return the money first, which is even more unreasonable. because we have no direct business dealings with them, even if we want to return the money, inspur software group should terminate the contract with jining ninghua first, and then jining ninghua will terminate the contract with us. only then we have reason to return the advance payment to jining ninghua, and finally jining ninghua will return it to inspur software group."

in order to verify the attitudes of the parties, securities times reporters called jining ninghua and inspur software group respectively, but the calls were unsuccessful.

liang xiaoang, a lawyer at beijing yingke (zhengzhou) law firm, believes that the creditor's right of subrogation refers to a system in which the creditor can exercise the right on behalf of the debtor when the debtor fails to exercise the rights he enjoys against the third party and is harmful to the realization of the creditor's rights. judging from the content of the "civil complaint", jining ninghua's debt to inspur software group has matured and has not been fulfilled, and it has not actively exercised its rights against chaoxun equipment, which has affected the realization of inspur software group's matured rights. therefore, inspur software group can exercise the debtor's rights on behalf of the debtor within the scope of its rights.

however, liang xiaoang also stated that if the information disclosed by chaoxun communications is true, that is, it has delivered certain equipment products to jining ninghua, then chaoxun communications can use this situation as a defense to inspur software group in this lawsuit.

chaoxun communications said that on the one hand, the company continued to send its legal team and business leaders to communicate with inspur software group and jining ninghua, and on the other hand, it actively responded to the lawsuit, defended and provided evidence to assert its legitimate rights and interests in accordance with the law. the court's acceptance of this lawsuit does not mean that the company and its subsidiaries are responsible for the relevant transaction disputes.

for chaoxun communication, since the problem lies with the upstream supplier, can the company sue the upstream supplier for breach of contract? chaoxun communication responded that it can sue, but it is not necessary for the time being. "because the company's contract with jining ninghua has not been terminated, if the contract continues to be executed, the company still needs the support of the upstream supplier."

if the contract with jining ninghua is terminated, will chaoxun communication suffer losses? the relevant person in charge of the company said that "it is not a big problem". "the advance payments made by the company in the early stage were made through the opening of letters of credit and other methods. at the same time, the company has smooth communication with upstream suppliers, so it is not difficult to recover the relevant funds if necessary."