The Information Investigates South Korea's High-End HBM Smuggling Chain

The Information investigates the smuggling chain of high-end memory chips in South Korea, interviewing a dealer in his twenties from Shenzhen who previously worked at a chip company and has now switched to the chip black market business. In just three years, he has built a network and is busy facilitating deals. The U.S. plans to restrict exports of advanced high-bandwidth memory (HBM) to China by the end of 2024, but there are loopholes in the regulations: HBM exports are restricted when sold separately, but if packaged with processors, they may be assessed based on the processing power of the processors to determine if they cross regulatory lines. A smuggler in his forties controls a chip design company that specializes in designing cheap and lower-performance server processors, which are rarely purchased but are used as a cover for procuring high-end HBM from South Korea. Packaging factories combine HBM from Samsung and SK Hynix with these processors on the same substrate and declare exports under the low-performance processor category. Once the goods enter mainland China through Hong Kong, workshops reheat and remove the HBM, while the cheap processors are discarded, as mishandling during disassembly could damage the memory. A stack of HBM3E has risen in price on the Chinese black market from a few hundred dollars a year ago to about $4,000, with an AI chip typically requiring 6 to 8 stacks, making the memory cost between $24,000 and $32,000. Some of the memory ultimately flows to Huawei customers, which plans to launch the next-generation Ascend 960DT in the first quarter of 2027, but domestic HBM supply is insufficient, prompting some customers to procure memory independently. As imitators increase, the smuggler responsible for procuring chips from South Korea plans to sell his controlling stake in the company next year, fearing that the expansion of routes will attract regulatory scrutiny.

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