A steady shadow supply chain for high-speed HBM memory from South Korea has formed in China, allowing intermediaries to bypass current export restrictions. According to The Information, the scheme's organizers exploit a loophole in US and South Korean regulations: export quotas account for processor specifications without considering the memory installed on them. As a result, expensive HBM from Samsung and SK hynix is attached to cheap chips, after which the finished boards are smuggled through Hong Kong to Shenzhen. On the local market, the price of a single HBM3E microchip has already reached $4,000, driven by an acute shortage of memory for AI accelerators.
How the Circumvention Scheme Works
The key smuggling mechanism relies on the formal compliance of export declarations: since restrictions are tied to the processor's parameters rather than the memory mounted on it, boards with cheap chips and expensive HBM pass inspection as "authorized" products. Once smuggled through Hong Kong into Shenzhen, they end up in specialized workshops where the chips are heated to extract the memory modules while the remaining components are discarded. Despite the real risk of microchip damage from thermal exposure, the scheme remains economically viable: a single AI accelerator requires six to eight HBM3E chips with a total value of about $32,000, making even partial losses acceptable to smugglers.
Why Domestic Production Cannot Close the Deficit Yet
China's domestic efforts to meet memory demand have not yet resolved the issue. Chinese manufacturer CXMT is preparing to launch mass production of HBM3E, but it faces low chip yield rates, which limits actual volumes. Meanwhile, Huawei has warned buyers of future AI servers that they will have to source memory for the new Ascend 960DT accelerator on their own, as the company cannot purchase it from Samsung and SK hynix. Thus, even major domestic players are forced to rely on shadow channels, further driving up prices and demand on the black market.
Risks of Stricter Control
Growing demand for AI hardware could make smuggling even more lucrative, yet the scheme's participants fear tightened oversight. The US is already investigating such shipments, and Taiwan and Malaysia are taking additional measures against smugglers. Under these conditions, the shadow HBM3E market remains in a high-risk zone: any tightening of border and customs control could sharply narrow smuggling channels and push prices even higher for the memory without which deploying modern AI accelerators is impossible.
