SEOUL — Despite rigorous U.S. export restrictions, high-bandwidth memory (HBM) chips manufactured by South Korean tech giants Samsung Electronics and SK Hynix are reportedly finding their way into China through sophisticated smuggling channels.

According to foreign media reports, underground supply chains have emerged to bypass sanctions designed to curb Beijing’s artificial intelligence development. As domestic shortages intensify within China, a single HBM chip is now commanding a steep price of roughly $4,000 on the illicit market.

Circumventing Regulations via Hybrid Packaging

The smuggling operation relies on a clever technical workaround. Brokers package HBM chips alongside inexpensive server processors onto a single substrate before export. Because U.S. export control criteria primarily evaluate processing performance rather than memory specifications at the package level, these shipments pass customs categorized merely as server processors.

Once the hybrid components arrive in China, underground technicians use heat to melt the solder and meticulously separate the HBM stacks from the accompanying server processors, which are subsequently discarded.

While heating carries a high risk of warping or cracking the delicate vertical memory stacks, the astronomical profit margins make the gamble worthwhile. Industry sources note that a year ago, an HBM3E chip sold for a few hundred dollars in China, but prices have skyrocketed tenfold due to soaring demand. Building a typical AI accelerator package requires six to eight HBM chips, translating to $24,000 to $32,000 in raw memory costs alone, excluding the processor, server hardware, and operational power expenses.

Huawei’s Supply Chain and Domestic AI Aspirations

The primary recipients of these smuggled components are reportedly tied to Chinese telecommunications giant Huawei and its clientele. Industry insiders indicate that Huawei has briefed clients on its next-generation AI accelerator, the Ascend 960DT, which relies heavily on South Korean HBM architecture to double the processing performance of its predecessors. Lacking direct channels to South Korean semiconductor makers, Huawei has allegedly instructed certain buyers to procure the necessary memory components independently.

As Chinese AI leaders—including DeepSeek and Moonshot—race to scale up large language models, their high-performance processors remain bottlenecked without sufficient HBM supply. With Samsung and SK Hynix commanding over 80% of the global HBM market, Chinese firms continue to rely heavily on South Korean technology to power their advanced systems.

Regulatory Risks for South Korean Manufacturers

Analysts warn that Samsung and SK Hynix could face heightened regulatory scrutiny from Washington if their components are repeatedly discovered inside restricted Chinese hardware.

A precedent was set when Taiwan’s TSMC faced an immediate U.S. ban on supplying certain AI chips to China after its components were found inside Huawei hardware. Both Samsung and SK Hynix maintain strict adherence to international export laws, with SK Hynix explicitly stating it has not supplied products to Huawei since U.S. regulations took effect in 2020.

Meanwhile, opinions among smugglers remain mixed. While some view their operations as a patriotic contribution to domestic technological self-reliance, others are exiting the business. With a surge of new market entrants using identical smuggling pathways, brokers warn that increased visibility will likely invite harsher crackdowns from U.S. and South Korean authorities moving forward.

[Copyright (c) Global Economic Times. All Rights Reserved.]