HBM smugglers exploit trade control loophole to bring banned memory from South Korea into China

How the loophole works

According to The Information, the owner of a chip design firm builds cheap, low-performance processors that fall outside US and South Korean export controls. Those processors are packaged together with expensive HBM memory from Samsung and SK hynix, which on its own is banned for export to China. Because the rules only examine the performance of the server processor, the HBM inside the package can leave the country without scrutiny.

Through Hong Kong to Shenzhen

Once the boards reach Hong Kong, they are carried across the border into Shenzhen in the luggage of commuters. In workshops, technicians heat the boards to soften the solder, lift off the valuable memory chips and discard the rest. The failure rate is high, but HBM prices make the procedure lucrative.

Prices have multiplied in a year

A Shenzhen-based chip broker says a single HBM3E unit that changed hands for a few hundred dollars a year ago now sells for about $4,000. Since an AI chip needs six to eight high-end memory chips, that works out to $24,000 to $32,000 in memory cost per GPU.

Domestic supply is not enough yet

Chinese memory maker CXMT has begun risk production of HBM3E, but yields are reportedly low. Huawei's Ascend 950DT sells for about $37,000 and delivers half the performance of the previous-generation H100. Unable to buy HBM from Samsung and SK hynix, Huawei has told customers to source the memory themselves, which further fuels demand for smuggled chips.

Pressure is mounting

The smuggler fears that US and South Korean authorities will soon crack down as the method becomes more popular. Washington has been taking a hard line on such activity, and Taiwan and Malaysia have stepped up anti-smuggling efforts. Seoul is expected to follow suit before long.