Banned Nvidia AI chips keep reaching China via shell firms and intermediaries

Recent US export-control cases show that banned Nvidia AI chips continue reaching China and Russia despite Washington’s crackdown. Brokers allegedly use encrypted messages, front companies, and third-country intermediaries to reroute restricted hardware. In one case, Matthew Kelly, Stanley Yi Zheng, and Tommy Shad English discussed moving banned Nvidia GPUs via shell firms, with Zheng cautioning against mentioning China in texts to avoid government attention. The BIS has announced nearly $420 million in combined penalties and forfeitures, including a $252 million penalty against Applied Materials for routing semiconductor equipment to China through a Korean subsidiary, and a $95 million fine against Cadence Design Systems.

Other notable incidents include a Florida case where 400 Nvidia A100 chips were smuggled into China through Malaysia and Thailand using a sham company, and the arrest of Supermicro cofounder Yih-Shyan “Wally” Liaw for a $2.5 billion server shipment to China via a Southeast Asian shell company. US officials fear these chips enable military AI systems used by Russia in Ukraine, surveillance infrastructure, and broader geopolitical competition. A Ukrainian analysis cited by the US Senate found that 72% of foreign components in Russian weapons originated in the US, including those in Kh-101 missiles. Despite permitting some Nvidia chips like the H200, restricted technology consistently flows to China through black-market channels.