Smugglers Melt Solder to Strip Korean HBM for Huawei

High-bandwidth memory (HBM) is a critical component for advanced artificial intelligence (AI) chips, enabling rapid data transfer essential for training large AI models. Without HBM, even powerful AI processors cannot perform as designed. Smugglers are reportedly exploiting a loophole in U.S. export rules by mounting HBM onto substrates alongside low-end server processors. This combined package is then classified as a low-end server processor, whose computing power assessment falls below export limits, allowing it to bypass restrictions on standalone HBM.

Once these packages arrive in China, they are immediately disassembled. Technicians apply heat to melt solder, carefully prying off the HBM while discarding the server processors. This precision work carries a high failure rate, as memory stacks can warp or crack if heat is applied incorrectly or for too long. Despite these challenges and accepted losses, the substantial profit margins reportedly make the operation viable. The HBM acquired through this channel primarily supplies Huawei's customers, with Huawei reportedly advising some customers to source the memory themselves for their next-generation AI chips, like the Ascend 960DT.

This situation creates a challenge for Korean suppliers, Samsung Electronics and SK hynix, who could face U.S. government scrutiny if their memory is found in Chinese-made AI chips. Taiwan's TSMC faced a U.S. investigation in 2024 after one of its chips reportedly appeared in a Huawei product. SK hynix has stated it strictly complies with all applicable export control laws and regulations and has not supplied products to Huawei since U.S. restrictions were imposed in 2020. A broker involved in these deals reported the price of a single HBM3E unit has jumped to about $4,000, adding significant cost to AI chip packages.