Cheap Chips, Expensive Cargo: How HBM3E Memory Is Finding Its Way Into China

The increasing desire for AI hardware in China has created a peculiar black market. Smugglers are said to be employing cheap processors to ship some of the most expensive memory chips across borders.

The coveted product in question is HBM3E, a form of high bandwidth memory designed by Samsung and SK hynix. The price of each single memory chip has now reached as high as $4,000 in the Chinese market due to strong demand and scarce supply.

According to The Information, smugglers have found a loophole in US and South Korean export restrictions. Instead of shipping HBM3E directly, they attach the memory to inexpensive processors. The resulting circuit boards travel through Hong Kong before reaching Shenzhen.

Why Smugglers Are Willing to Sacrifice Entire Circuit Boards

When the shipments get there, special workshops in China apply heat and extract the pricey memory chips. The rest of the components are thrown away.

The procedure has the possibility of ruining the memory, yet the possible profit margin is huge. Just one AI accelerator requires six to eight HBM3E chips that cost about $32,000 altogether.

China is trying to become less dependent on foreign vendors. CXMT is preparing for full-scale production of their own HBM3E memory, though yields remain a problem. In addition, Huawei has forewarned the future customers of its Ascend 960DT AI servers about having to provide the memory themselves.

Global AI Market

It is clear that memory shortages can cause significant problems in the AI industry. While export controls may delay your access to modern technology, they can create additional motivations for smuggling as well.

As a result, you will have to pay more money for your hardware and wait longer as memory becomes increasingly sought after. The real challenge is whether Chinese producers will be able to catch up with the technological gap.

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