Taiwan said to suspect Nvidia chips smuggled to China via Japan

TAIPEI – Taiwan prosecutors suspect that three individuals successfully smuggled at least one shipment of Nvidia Corp AI chips to China after first exporting them to Japan, people familiar with the matter said.

The trio was detained last week by Taiwan’s Keelung District Prosecutors Office for allegedly falsifying documents related to exports of Super Micro Computer Inc servers containing advanced Nvidia chips, which the US has barred from sale to China without a licence from Washington.

The move marked the island democracy’s first public crackdown on AI chip diversion after years of pressure from the US to take a more active role in curtailing China’s tech access.

When Taiwan authorities apprehended the three defendants – who’ve now been officially detained – they also seized about 50 servers for which they accuse the trio of preparing fraudulent export documents.

But at least one shipment had already gone through Taiwan customs, according to the people familiar with the matter, who requested anonymity to speak about an ongoing criminal investigation.

That earlier shipment went to Japan before eventually making it to Hong Kong, a known waypoint for hardware that’s ultimately shipped to mainland China, the people said.

The people declined to specify the amount of hardware that Taiwan authorities believe was successfully smuggled.

The defendants also allegedly planned to use Japan as an intermediary location for the batch of servers that Taiwan officials seized last week, according to the people. 

The probe may be the first known instance of prosecutors targeting an AI-chip smuggling route through Japan, a close ally of the US and cornerstone of American defence strategy in the Asia-Pacific.

Other cases have focused on diversion via South-east Asia, including the biggest such indictment in the US. 

Officials at the Japanese Ministry of Finance’s Customs Bureau and the Ministry of Economy, Trade and Industry didn’t respond to requests for comment on Taiwan’s suspicions.

Nor did they answer questions on whether Tokyo has been in communication with its Taiwanese counterparts about the case.

A spokesperson for the Keelung District Prosecutors Office in Taiwan declined to comment, citing an ongoing investigation.

Bloomberg was unable to contact the three defendants, whom the prosecutors office has identified only by surname.

Japan is one of many locations in Asia where Chinese companies access American AI chips – by renting hardware that’s owned by foreign firms and installed in overseas data centres.

That setup is generally permitted under US export control rules, which were first imposed in 2022 over concerns that advanced AI could lend Beijing a military edge.

But many in Washington have long been convinced that Chinese firms have also managed to procure smuggled hardware within their home country.

And after years of relative quiet on the chip export control enforcement front, American prosecutors are now pursuing at least five criminal cases related to semiconductor diversion.

That’s on top of chip export fraud cases in Taiwan and Singapore, which don’t have their own semiconductor export controls and instead rely on local laws to address the issue.

Taiwan authorities haven’t accused Nvidia or Super Micro of any wrongdoing.

Nvidia Chief Executive Officer Jensen Huang, asked on May 23 about the Taiwan case, said that the chipmaker is “rigorous” in explaining regulations to all of its partners. 

“Ultimately Super Micro has to run their own company,” Mr Huang told reporters upon his arrival in Taipei, where he’s set to attend events through the week.

“I hope that they will enhance and improve their regulation compliance and avoid that from happening in the future.” 

Nvidia didn’t respond to a request for comment, while Super Micro declined to comment. 

In response to Mr Huang’s comments, Super Micro said on May 23 its “robust compliance frameworks” are “supported by rigorous due diligence in alignment with Nvidia and other partners.”

“In addition, recent events underscore the need for industrywide solutions that would further help safeguard supply chains and strengthen enforcement of export control laws,” the company said in an emailed statement at the time. BLOOMBERG