california bust: nvidia ai chips smuggled to china in multi-million dollar scheme

2025-08-07 nvidia

Los Angeles, Thursday, 7 August 2025.
two chinese nationals have been apprehended in california for allegedly smuggling millions of dollars worth of nvidia ai chips to china. the u.s. department of justice accuses them of violating export control laws. the suspects allegedly used a california-based company to ship high-performance ai chips, including nvidia’s h100 gpus, through singapore and malaysia. payments for these shipments were received from entities in hong kong and china, not the declared recipients. if convicted, they face up to 20 years in prison, highlighting tensions surrounding chip export controls and china’s demand for advanced semiconductors.

Details of the arrest and charges

Chuan Geng and Shiwei Yang, both 28 years old, face charges of violating the Export Control Reform Act [1][2]. Geng surrendered to federal authorities, while Yang was arrested [2]. A federal judge set Geng’s bail at $250,000, with Yang’s detention hearing scheduled for August 12 [2]. The Justice Department alleges that Geng and Yang knowingly exported sensitive technology, including GPUs, used in AI applications without the required licenses [2][3]. Their company, ALX Solutions Inc., is accused of sending at least 21 shipments to Singapore and Malaysia between October 2022 and July 2025 [1][3].

Nvidia’s response and compliance

Nvidia maintains that it primarily sells its products to well-known partners and OEMs who ensure compliance with U.S. export control rules [1][2][3]. The company stated that even smaller exporters and shipments undergo thorough review [1][2]. Nvidia has also emphasized that any diverted products would not receive service, support, or updates [2][3]. Nvidia has stated that data centers using smuggled chips are a losing proposition and that it does not support unauthorized products [1]. The company opposes embedding backdoors or kill switches in chips, citing security risks [6].

Impact of export controls on nvidia

The U.S. government has been tightening export restrictions on semiconductors and chip-making equipment to slow China’s progress in AI [2][3]. These restrictions require licenses for exporting advanced chips like the H100 to China and other countries considered national security threats [2]. Despite these controls, a Financial Times report in July 2025 indicated that approximately $1 billion worth of Nvidia’s chips had entered China [1]. In response to U.S. pressure, Malaysia announced in July 2025 that it would begin requiring trade permits [1].

Potential implications for nvidia’s market position

The smuggling incident and stricter export controls could affect Nvidia’s market access and revenue streams in China [GPT][1]. While Nvidia CEO Jensen Huang stated that the U.S. government agreed to lift the ban on its H20 GPU sales to China after discussions with President Trump, the incident highlights the challenges Nvidia faces in navigating export regulations [3]. The company designed the H20 specifically for the Chinese market, with reduced capabilities compared to the H100 [3]. This situation could impact Nvidia’s competitive advantage and its ability to capitalize on the growing demand for AI chips in China [GPT][1].

Bronnen

export controls chip smuggling