Smugglers are reportedly soldering top-tier HBM onto deliberately useless processors to sneak it into China, and the trick isn't new

Smugglers are reportedly combining top-tier HBM from Samsung and SK hynix with deliberately useless processors to evade export regulations and sneak the memory into China. These packages pass through Shenzhen workshops where the solder is heated, allowing the memory to be extracted and sold for around $4,000 per stack, primarily to Huawei customers.

This method exploits a December 2024 Bureau of Industry and Security (BIS) exclusion for co-packaged chips where the primary function is processing. The memory, often reaching China attached to processors designed never to be used, has Chinese buyers lining up for more. The scheme gained wider attention when Chinese tech commentator AB Kuai.Dong summarized the report, calling the arrangement a "compliant export."

The process involves smuggling the packages across various borders to Chinese workshops, where the risk of damage to the memory stacks due to improper heat application is considered acceptable given the high margins. Despite the BIS's attempt to control this through a rule in December 2024, smugglers have continued to find ways to bypass it, particularly by using processors engineered to be useless.