Extensive AI Chip Smuggling to China Uncovered
A comprehensive analysis of available evidence reveals that artificial intelligence (AI) chip smuggling to China has likely been occurring on a significant scale, potentially undermining U.S. efforts to restrict China’s access to advanced AI technology. Four key lines of argument support this conclusion:
- Historical precedent suggests that China has consistently smuggled U.S. technology despite export restrictions, with rare criminal or civil penalties.
- The superior performance, higher supply, and more mature software ecosystem of U.S. AI chips create strong incentives for smuggling.
- Publicly available data shows that of 22 notable AI models developed exclusively in China by 2024, only two were trained using Chinese chips.
- Multiple news outlets have reported evidence of large-scale AI chip smuggling, involving tens to hundreds of thousands of chips in 2024 alone.
Notable cases include:
- One smuggler handling an order of 2,400 NVIDIA H100s worth $120 million
- Another facilitating an order worth $103 million
- Singapore authorities arresting three individuals suspected of diverting AI servers worth $390 million
Chinese chip resellers claim that accessing export-controlled AI chips is relatively straightforward, with one start-up founder estimating over 100,000 NVIDIA H100s in China as of 2024. The authors found 132 domestic listings for export-controlled chips on Chinese online marketplaces, with average quantities of 1,200 GPU servers and 400 GPU cards per listing.
Estimating the Scale of Smuggling
Using a probabilistic model based on publicly available data, the authors estimate that AI chip smuggling to China in 2024 could have ranged from 10,000 to several hundred thousand chips, with a median estimate of around 140,000. This could account for between 1-30% of China’s inference compute capacity or 1-40% of its training compute capacity in 2024.
Policy Recommendations
To address this issue, the authors propose six key recommendations:
- AI chip companies should strengthen due diligence processes and require similar measures from their distributors.
- The Bureau of Industry and Security (BIS) should create a notification requirement for controlled AI chip exports and reexports.
- AI chip designers should implement software-based location verification features.
- The Department of Commerce should establish processes to gather information on AI chip smuggling.
- Congress should authorize a whistleblower incentive program and qui tam lawsuits.
- Congress should grant the BIS its requested budget increase to improve enforcement capabilities.
These measures aim to enhance enforcement, improve tracking, and increase penalties for violators, thereby protecting U.S. national security interests in the AI technology sector.
