WORLDTECHSmugglers pair banned Samsung and SK hynix HBM with cheap chips to get into China
Smugglers are reportedly exploiting a gap in US export controls by packing high-bandwidth memory from South Korea into servers with low-end processors that fall outside the restrictions, according to a report that cites a smuggler's own account.
How the loophole works
Export rules for servers look only at the performance of the main processor. Customs checks follow the same logic, so an otherwise ordinary server can carry high-end memory without triggering a stop at the border.
The Information reports that the smuggler runs a chip design company that builds inexpensive, low-performance processors which fall under the US thresholds. Samsung and SK hynix HBM, which is banned for export to China on its own, is then attached to these processors and the assembled units are shipped in.
Route through Hong Kong and Shenzhen
According to the report, the processors and memory travel through Hong Kong and are carried across the border into Shenzhen in the luggage of commuters. In Shenzhen, technicians heat the boards to soften the solder, lift out the memory chips and discard the remaining components.
The procedure has a high failure rate, but the price of HBM makes it lucrative. A Shenzhen-based broker reportedly matches suppliers such as the smuggler with buyers who need HBM.
The smuggler is quoted as saying that a single HBM3E unit changed hands in China for several hundred dollars a year ago. The broker's margin is estimated in the report at $24,000 to $32,000 per AI GPU, since such a chip needs six to eight high-end memory chips.
Supply pressure on Chinese AI labs
Chinese AI labs face the same memory bottleneck when acquiring AI GPUs. The domestic memory maker CXMT has begun risk production of HBM3E and is expected to mass produce it by the end of this year, but it is reportedly still suffering from low yields, which keeps its chips costly to produce and buy.
Huawei has reportedly said its next-generation flagship AI processor, the 960DT, would deliver performance similar to the H100.
Open questions
- Will US authorities change export rules so that they assess the memory attached to servers as well as the processor?
- How many units have passed through this route, and how much of China's HBM supply it accounts for?