Hundreds of Thousands of Nvidia AI Chips Smuggled Into China Via Asia
A major hole has emerged in the United States’ stringent export control regime targeting China’s semiconductor sector. Hundreds of thousands of Nvidia’s high-performance artificial intelligence (AI) processors are believed to have entered China via Southeast Asia and Taiwan, intensifying scrutiny of
The United States' export control regime against China's semiconductor sector has been found to have a critical vulnerability. According to Bloomberg and other international news organizations, hundreds of thousands of Nvidia's powerful artificial intelligence processors may have been smuggled into China through Southeast Asia and Taiwan.
U.S. authorities estimate that the amount of computing resources, equivalent to over 115,000 Nvidia chips subject to export restrictions, has entered China. A firm specializing in semiconductor analysis, SemiAnalysis, found that the total volume of AI chips entering China could reach hundreds of thousands, sufficient to power multiple small-scale data centers at once.
Smuggling brokers took advantage of intricate distribution networks and inadequate due diligence checks. One prominent case involved Supermicro's founder, Wally Liao, who was charged with selling $2.5 billion worth of hardware to a Thai firm, OBON, and then delivering it to Chinese customers. Reports found fraudulent lease contracts and insufficient power capacity for the servers OBON had ordered.
Similar maneuvers were discovered in Taiwan with Flying Tiger ordering 130 servers equipped with Nvidia's latest "Blackwell" chips, which were allegedly redirected to China via Japan and Indonesia, with serial-number stickers on packaging removed using a hair dryer. Nvidia has denied any intention to facilitate this diversion, stating that the detected smuggled chips represent less than 0.5% of its total production.
Despite this, U.S. officials assert that Nvidia missed clear red flags, approving orders when companies with minimal data-center infrastructure placed large chip orders. A former U.S. State Department official on AI policy questioned how such a massive shipment to Southeast Asia could have occurred without a clear plan to deliver the chips to China.
Additionally, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) has faced challenges in enforcing export controls, citing a shortage of overseas staff. Some smuggling networks were able to evade detection, requiring BIS to rely on voluntary cooperation instead of forcible shipment halts. Nvidia and server manufacturers have since attempted to tighten oversight, incorporating hardware tracking and limiting approved customers in Asia.
However, black-market intermediaries are adapting by rerouting shipments through Europe and the Middle East, suggesting the conflict between U.S. authorities and smuggling networks over advanced technology diversion will persist.
Written by urgent.news from BusinessKorea's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
