A young man in his 20s from Shenzhen made a fortune through the South Korean chip black market: after three years, he's already dressed head-to-toe in designer brands.

Beating AI News Flash: The Information investigated the smuggling chain for high-end memory chips from South Korea and interviewed a Shenzhen dealer in his 20s. He originally worked at a chip company and, relying on the connections he built up, switched careers to run a black-market chip business. After only 3 years in the trade, he is now dressed head to toe in designer brands and spends every day connecting buyers and sellers.

The United States began restricting exports of advanced HBM (high-bandwidth memory) to China at the end of 2024. But the rules left a loophole: HBM exports are restricted on their own, but if they are packaged together with a processor, the determination of whether they cross the regulatory red line may instead be based on the processor's computing power.

A smuggler in his 40s thus took control of a chip design company specifically to design cheap, low-performance server processors. No one was willing to buy these chips at all, yet they became a cover for procuring high-end South Korean HBM.

Packaging plants mounted HBM from Samsung and SK Hynix together with these processors on the same substrate and declared them for export under the low-performance processor category. After the goods entered mainland China via Hong Kong, workshops reheated them to remove the expensive HBM, while the cheap processors were simply thrown away. A slight mistake during removal could damage the memory.

A stack of HBM3E cost only a few hundred dollars on China's black market a year ago, but has now risen to about $4,000. An AI chip typically requires 6 to 8 stacks, meaning memory alone costs $24,000 to $32,000.

Some of the memory ultimately flows to Huawei customers. Huawei's next-generation Ascend 960DT is planned for launch in the first quarter of 2027, but domestic HBM supply is insufficient, and Huawei has asked some customers to procure memory themselves.

Imitators are now increasing. The smuggler in his 40s responsible for procuring chips from South Korea instead plans to sell his controlling stake in the company next year. He worries that more and more people will master this route and eventually trigger strict scrutiny from South Korean and U.S. regulators.