▲ HBM4 chips by SK Hynix and Samsung Electronics
Despite U.S. export bans against China, smugglers are exploiting regulatory loopholes to smuggle advanced high-bandwidth memory (HBM) chips produced by Samsung Electronics and SK Hynix into China, the IT specialized media outlet The Information reported on November 2 (local time).
The increasingly prevalent smuggling method involves packaging HBM chips onto a circuit board alongside low-end server processors and exporting them to China.
In this case, because the shipment is classified under server processors rather than as standalone HBM exports, it can bypass export restriction regulations.
According to U.S. export regulations, the overall computing capability of a package is determined by the server processor, not the memory chips.
Within China, processes are set up to separate the HBM chips back out from these imported packages.
Technicians in this field apply heat to the package to melt the solder, detach the necessary memory stacks, and discard the remaining server processors.
This separation process is extremely delicate, and the failure rate is high.
If heat is applied too quickly or for too long, the internal memory stacks can warp or crack.
Smugglers take on these risks because the profits generated from this operation are substantial.
The secured HBM chips are primarily sold to customers of Huawei Technologies, a comprehensive Chinese IT and telecommunications technology company.
According to sources familiar with Huawei's supply chain, Huawei recently informed certain customers that a significant portion of its next-generation flagship AI chip, the Ascend 960DT, will be equipped with HBM produced by Samsung Electronics and SK Hynix.
Huawei explained that the Ascend 960DT delivers twice the performance of existing chips and will become one of the most powerful processors that China can manufacture domestically.
Furthermore, as Huawei became unable to purchase the necessary memory chips directly from South Korean companies, it instructed some customers who ordered its AI chips to source the required memory chips themselves.
This effectively means that China's major tech conglomerates have come to rely on South Korea's high-performance HBM for their AI chips.
▲ Huawei Ascend Chip Exhibition Booth
Huawei has been supplying chips powerful enough to efficiently run Chinese open-source models like DeepSeek.
However, HBM is experiencing global supply shortages, and production within China remains extremely negligible.
Samsung Electronics and SK Hynix command over 80 percent of this market.
The Information pointed out that this situation poses a troublesome issue for Samsung Electronics and SK Hynix.
This is because if Chinese-made AI chips containing their memory are discovered, the companies could become targets of monitoring by the U.S. government.
Previously, Taiwan's TSMC faced an investigation by the U.S. government after its chips were found in Huawei products in 2024, following which the U.S. ordered TSMC to completely halt AI chip exports to China.
SK Hynix stated, "We are thoroughly complying with relevant regulations, including U.S. and South Korean export control rules," adding that it has not supplied products to Huawei since U.S. export controls took effect in 2020.
Consequently, the shortage of HBM is cited as the biggest bottleneck obstructing China's AI ambitions.
Because HBM can transmit data at ultra-high speeds, it extracts the maximum processing performance of AI chips.
Without it, no matter how advanced an AI chip may be, it becomes rendered useless.
In particular, training massive AI models requires combining HBM with powerful AI processors such as NVIDIA products.
Without sufficient memory support, Chinese companies such as DeepSeek and Moonshot inevitably face limitations in continuously training and deploying large-scale AI models.
A merchant in his 20s who works as a smuggler and broker for memory chips in China does not call himself a smuggler.
Instead, he considers his work to be an act of patriotism.
He told The Information, "It is contributing to the motherland."
He noted that prices have soared due to surging demand, stating, "Just a year ago, a single HBM3E chip traded for a few hundred dollars in China, but now it trades for around USD 4,000."
A single AI chip package requires six to eight such memory chips, meaning that excluding the cost of the AI chip itself, servers, and power expenses, the memory cost alone adds USD 24,000 to USD 32,000.
One smuggler who has been ordering memory semiconductors from South Korea feels that with the influx of copycats, it is now time to step away from this business.
He said, "The routes I use are now being utilized by many other operators as well. The more people like us there are, the easier it becomes to get caught by regulatory authorities. Crackdowns by South Korea and the United States will only intensify going forward. I plan to sell most of my company stakes next year."
(Photo: Provided by SK Hynix and Samsung Electronics, AP, Yonhap News)
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