South Korean AI Memory Chips Smuggled Into China Through Export Control Loophole
Smugglers are exploiting weaknesses in international export restrictions to move high-performance memory chips from South Korea into China, supplying critical components for advanced artificial intelligence development.
Smugglers have reportedly discovered a way to bypass US export restrictions by packaging high-bandwidth memory (HBM) chips alongside low-performance server processors before shipping them into China. The technique exploits a loophole in export regulations that classifies the combined package according to the processor’s computing power rather than the advanced memory attached to it. This allows restricted memory components to enter China despite existing limitations on their direct export.
Once the packages arrive in China, technicians carefully heat the boards to soften the solder and separate the valuable memory chips from the cheaper processors. The recovered HBM is then distributed to customers seeking components for advanced AI systems. However, the process is technically difficult, and excessive heat can damage the memory stacks. Despite the risks, the operation remains attractive because of the significant profits involved.
The memory chips are reportedly produced by South Korean technology companies Samsung Electronics and SK hynix, two of the world’s leading suppliers of high-bandwidth memory. Reports indicate that Huawei’s customers are among the major beneficiaries of the smuggled components, as China’s domestic semiconductor industry struggles to produce enough advanced memory for its growing AI ambitions. A single HBM3E unit reportedly costs around $4,000, meaning the memory required for one AI chip package could reach between $24,000 and $32,000.
The development could create serious challenges for South Korea and the United States as they attempt to enforce restrictions on advanced semiconductor technology reaching China. Samsung and SK hynix could face increased regulatory scrutiny if their products are discovered inside restricted Chinese AI systems, even if the companies did not directly supply them. Meanwhile, the growing smuggling network highlights the difficulties of controlling critical technology in an increasingly competitive global AI industry.
