Over $1billion worth of Nvidia chips smuggled into China despite US export ban: Report

A recent investigation by the Financial Times has revealed that over $1 billion worth of Nvidia's high-end AI chips were illicitly transported into China from April to June 2025. The smuggled chips include Nvidia's top models: B200, H100, and H200, all of which are restricted from export to China under U.S. trade policies designed to impede Beijing's advancements in artificial intelligence. The report indicates that these chips were rerouted through Southeast Asia and sold via grey-market networks across various Chinese provinces, such as Guangdong, Zhejiang, and Anhui. Notably, a distributor based in Shanghai, known as "Gate of the Era," reportedly managed transactions worth nearly $400 million in B200 systems, offering pre-assembled AI server racks for prices soaring to $500,000 each, significantly higher than U.S. retail rates. In response to these claims, Nvidia told Reuters that there is no substantiated evidence that its chips have been diverted from authorized sales channels. The company stressed that any unauthorized chips would lack official software support, potentially leading to inefficiencies in AI data centers. As the black-market trade flourishes, an unofficial repair industry has also emerged in China. Reports indicate that unauthorized repair shops in Shenzhen are now servicing these banned Nvidia chips, charging between ¥10,000 and ¥20,000 per unit. Some of these repair businesses claim to handle as many as 500 chips monthly, many of which have been smuggled or obtained through unregulated means. While the U.S. Commerce Department has not yet commented on the findings of the Financial Times report, officials are considering various enforcement strategies, including enhanced scrutiny of transshipment hubs and implementing firmware-based tracking to combat unauthorized diversions. Additionally, U.S. lawmakers are advocating for new legislation aimed at increasing transparency in semiconductor exports, which might involve embedding tracking systems in chips or mandating post-sale usage disclosures. Ironically, this surge in smuggling comes just weeks after the U.S. lifted restrictions on Nvidia's less powerful H20 chip, allowing American companies to resume certain shipments to China. However, the more advanced B200 and H100 models remain under stringent export controls, fueling the ongoing black-market trade. The developments highlight the mounting difficulties faced by regulators as they strive to manage a rapidly advancing AI arms race. With China's escalating demand for advanced computing technology and emerging enforcement gaps, the conflict over chip access is far from resolved.