Smugglers Reportedly Pair $4,000 AI Memory With Cheap Server Chips Before Stripping Them Apart in China

Smugglers are reportedly exploiting a loophole in United States export controls by bonding restricted HBM memory to low-end server processors, shipping the packages to China and then heating them apart to recover the valuable AI memory.

The alleged scheme centres on high-bandwidth memory, or HBM, which cannot be exported to China on its own but may fall outside restrictions when integrated into a logic-chip product.

The loophole is said to stem from December 2024 export rules that exempted HBM already packaged with a processor. Because the package's computing capability is assessed by the processor rather than the memory, a deliberately weak chip paired with top-tier HBM can apparently be classified below the restricted threshold.

How the HBM Smuggling Route Works

According to the reported account, one broker runs a chip-design firm that appears on paper to be an ordinary business. The man, described as being in his 40s and fluent in Chinese and Korean, is said to have experience in South Korea's semiconductor industry.

His company reportedly designs processors that are cheap and underpowered, and are not intended for use in data centres. That provides a commercial basis to order premium HBM. Specialist packaging firms in Taiwan, South Korea and Southeast Asia then bond the memory stacks to the processors.

The finished packages are declared under the processor's classification code and sent to Hong Kong. From there, they are allegedly transported into mainland China in luggage, car boots and the bags of toll couriers and daily commuters.

Once inside China, workshops run by alleged accomplices heat the packages until the solder softens. The HBM stacks are removed, and the inexpensive processors are discarded.

According to the account, the work is technically demanding and carries a risk of damaging the memory, since heating the packages too quickly or too slowly can warp or crack the stacks. The reported profit margins are described as sufficient to offset these losses.

Why HBM3E Has Become So Valuable

One broker told the source that HBM3E memory, which sold for a few hundred dollars a year ago, now costs about $4,000 (€3,700 and £3,100). The memory is used in advanced AI systems, where high-speed data transfer is as important as processing power.

A chip broker in Shenzhen, described as being in his early 20s with three years in the trade, reportedly said HBM3E had risen sharply in value over the past year. He allegedly began working at a chip company, where he built contacts able to extract memory from legitimate Samsung and SK hynix supply chains.

A single AI chip package requires six to eight HBM stacks. At the reported price, the memory alone would cost between $24,000 (€22,200 and £18,600) and $32,000 (€29,600 and £24,800), before the processor, server and power requirements are added.

The broker reportedly does not describe himself as a smuggler. Instead, he is said to view his work as a contribution to China.

A Wider Problem for Export Controls

The reported HBM scheme is not the only example of advanced US-controlled hardware allegedly reaching China. NVIDIA's Blackwell Ultra B300, which is subject to US export restrictions, was previously identified operating within China Telecom's network.

Security firm Lava reportedly identified 32 B300 units remotely through NVIDIA's Data Center GPU Manager Exporter tool, which was accessible online without password protection. The B300 carries 288GB of HBM3E memory across eight 12-high stacks, according to NVIDIA's product information, and is designed for AI workloads.

NVIDIA disputed the significance of the findings. A spokesperson told The Information that, with tens of millions of GPUs operating in approved countries, the discovery demonstrated that smuggling was a non-factor and that governments on both sides of the globe were blocking it.

China's own HBM development is reportedly progressing slowly, which may be one reason illicit channels remain in use. The alleged network described in the latest report involves packaging partners, Hong Kong transit routes, informal couriers and Shenzhen brokers.

IBTimes UK cannot independently verify these claims. The allegations rest on reporting rather than public court records or an official enforcement announcement, and no agency has publicly confirmed the alleged smuggling operation.

According to the reported account, the current rules were written for chips as finished products, while the alleged smugglers treated them as raw materials by separating the processors from the memory.