It’s not a risk-free operation, though. Once the mediocre processors with high-end memory chips land in Hong Kong and are smuggled across the border into Shenzhen in the luggage of commuters that cross between the two regions daily, they end up in workshops where technicians heat up the boards to soften the solder, gingerly lift the crucial memory chips, and discard the rest of the components. Despite having a high failure rate, the high price of HBM chips makes the procedure quite lucrative.
A Shenzhen-based chip broker has been making big money matching up suppliers such as the smuggler and companies that are desperate for HBM. “A year ago, a single HBM3E unit changed hands in China for several hundred dollars,” he tells the publication. “Today it’s about $4,000.” With an AI chip requiring six to eight high-end memory chips, that means the broker is raking in $24,000 to $32,000 for every AI GPU.
Chinese AI labs face this exact memory chip bottleneck when acquiring AI GPUs. While Chinese memory manufacturer CXMT has already begun risk production of HBM3E and is expected to mass produce them by the end of this year , it’s still reportedly suffering from low yield, which makes their chips expensive to produce and procure. We see this with Huawei’s Ascend 950DT, its current top-of-the-line processor that goes for about $37,000 — it offers similar pricing to Nvidia’s B200 AI GPU but only delivers half the performance of the previous-generation H100.
Huawei has reportedly said that its next-generation flagship AI processor, the 960DT, would deliver a similar performance as the H100. However, since the company cannot purchase HBM from Samsung and SK hynix, and Chinese memory manufacturers do not have the capacity to supply all its chip demands, Huawei told customers that they have to find the HBM that these servers need themselves. This would further fuel the demand for these chips, increase the price and make it more lucrative for smugglers to set up similar operations.
Investigative report details how export-restricted Nvidia AI chips reach China
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/semiconductors/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/semiconductors/ai-chip-smugglers-exploit-trade-control-loophole-to-bring-banned-hbm-from-south-korea-into-china-expensive-memory-chips-packaged-with-cheap-unsanctioned-processors-to-become-legal-exports#main
- https://www.tomshardware.com/membership
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Informational only. No financial advice. Do your own research.