For Chinese language AI firms, US authorities restrictions on NVIDIA chips solely kick in if they provide up. These firms have as soon as once more discovered a workaround to acquire NVIDIA {hardware}.
In response to the Wall Road Journal, engineers from Chinese language AI firms are heading to Kuala Lumpur, Malaysia, with laborious drives filled with directions and knowledge to coach AI fashions. They then utilise the NVIDIA chips out there in Malaysian knowledge centres to coach the mannequin and return it to China.
The report added that engineers determined it will be quicker to fly bodily laborious drives with knowledge into Malaysia than to switch knowledge on-line. This unnamed Chinese language firm additionally reportedly registered an entity in Malaysia to keep away from elevating suspicions.
The aforementioned technique is deemed an alternative choice to straight smuggling NVIDIA {hardware} in China, which was made tough attributable to latest crackdowns from a number of authorities companies.
As an example, Malaysia’s semiconductor business carefully displays the motion of chips throughout borders, aligning with the US push for stricter rules on suspected inventory motion by the Southeast Asian nation.
Malaysia and Singapore are listed as Tier 2 international locations within the US authorities’s Framework of Synthetic Intelligence Diffusion, which allows restricted chip exports with no license.
China is categorised in Tier 3, the place exports are banned or extremely regulated. Nevertheless, this present framework might be changed with a extra simple method, transferring away from the tier-based system.
Furthermore, authorities in Singapore and the US are investigating allegations that NVIDIA chip servers price $390 million despatched to Malaysia have been fraudulently redirected to China.
Moreover, final month, a US lawmaker launched a invoice to deal with chip smuggling. The invoice would require firms like NVIDIA to incorporate expertise to confirm the situation of their chips earlier than exporting them.
Dwell Lobsters, Child Bumps and Toys
The rules, scrutiny, and crackdown have been applied in response to Chinese language AI firms using a number of illicit strategies.
The Centre for a New American Safety (CNAS), a US-based suppose tank specialising in nationwide safety points, estimated that out of the 22 “notable” AI fashions developed in China as of 2025, solely two have been skilled with Chinese language chips.
“Many of the Chinese language chip sellers interviewed in these [media] reviews verify that they work with a number of distributors, use shell firms primarily based abroad, and make use of easy techniques to keep away from detection, similar to relabeling shipments as tea or toys,” the CNAS report learn.
Final 12 months, The Data reported that an unnamed electrical equipment firm in japanese China had ordered lots of of servers geared up with NVIDIA’s H100 GPUs, price $120 million, with the assistance of a chip dealer in Malaysia. This dealer had assisted the Chinese language agency in establishing a shell firm in Malaysia and renting area in a knowledge centre.
The report highlighted many such circumstances of Chinese language firms illegally acquiring NVIDIA chips.
Furthermore, as per a Reuters report, Chinese language universities and analysis institutes had acquired GPUs from resellers within the nation. These resellers bought servers from Tremendous Micro Laptop and Dell, which have been geared up with NVIDIA chips.
Moreover, Amazon-backed Anthropic, the AI lab that constructed the Claude household of fashions, stated that smugglers in China disguise processors in “prosthetic child bumps” and pack GPUs alongside dwell lobsters.
Singapore accounts for a substantial a part of NVIDIA’s reported income, regardless of only a few bodily {hardware} shipments to the nation. Between August and October 2024, Singapore contributed 22% to NVIDIA’s gross sales income.
Nevertheless, Bloomberg reported that precise bodily shipments to Singapore account for just one% of NVIDIA’s complete income, exhibiting a big hole between the place NVIDIA data gross sales and the place its {hardware} is definitely delivered. In Q1 2025, Singapore accounted for 20% of NVIDIA’s billed income.
Citing publicly out there data, the CNAS report stated there have been 1 lakh H100 GPUs as of December 2024.
NVIDIA and Trump’s AI Czar Deny Chip Smuggling
Whereas Anthropic accused Chinese language firms of smuggling GPUs, NVIDIA reportedly denied such claims.
An NVIDIA spokesperson stated American corporations like Anthropic ought to concentrate on innovation and rise to the problem, “relatively than telling tales about giant, heavy and delicate electronics by some means being smuggled in child bumps or alongside dwell lobsters”.
Moreover, the ‘AI czar’ appointed by US President Donald Trump, David Sacks, additionally refuted the practicality of such smuggling mechanisms.
In an interview on the AWS Summit final month, Sacks stated, “We speak about these chips like they are often smuggled like diamonds in a briefcase—that’s not what they seem like. These are server racks which are eight ft tall and weigh two tonnes.”
“They don’t magically stroll out the door,” he added.
That being stated, regardless of Chinese language firms reportedly utilizing varied methods to work with NVIDIA chips, the corporate isn’t backing down both.
The US authorities and NVIDIA have been engaged in an ongoing cycle of restrictions and workarounds. The federal government has repeatedly blocked NVIDIA from promoting high-end AI chips, prompting the corporate to develop much less highly effective variations that adjust to the brand new limits. This sample has repeated a number of instances.
At the moment, NVIDIA is reportedly growing a brand new chip that’s much less highly effective and cheaper than its H20 chips, that are the newest to face US authorities restrictions.
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