Nvidia's advanced AI chips have been smuggled into China via Japan, signaling cracks in the U.S. semiconductor export control regime targeting China. Yet, separately from such circumvention efforts, China is also accelerating the development of domestic AI chips by companies such as Huawei, leading some analysts to argue that U.S. export restrictions are actually hastening China's technological self-reliance.
Via Japan to Hong Kong: Taiwan Probes AI Chip Smuggling
Bloomberg reported on Thursday (local time) that the Keelung District Prosecutors Office in Taiwan has detained three suspects and is investigating them on charges of smuggling Nvidia AI chips.
The suspects are accused of forging export documents for Super Micro Computer servers equipped with Nvidia advanced chips subject to U.S. export restrictions on China. Prosecutors believe they attempted to reroute the servers to China via Japan.
Authorities seized about 50 servers, but some shipments had already cleared Taiwanese customs. Those shipments are reported to have entered Hong Kong via Japan. Hong Kong is regarded as a major transshipment hub for IT equipment and semiconductors heading to mainland China.
The case is drawing attention as the first time Japan has been officially cited as a transit point for AI chip smuggling. Until now, Southeast Asian countries such as Singapore, Malaysia, and Vietnam have mainly been identified as routes for evading U.S. AI chip export controls.
Super Micro Computer is a Silicon Valley-based server company and a prominent Taiwanese-American firm founded by CEO Charles Liang, a Taiwanese immigrant.
Nvidia CEO Jensen Huang met with reporters in Taipei the same day and said, "We are strictly explaining the rules to all our partners," adding, "We must strengthen compliance so that the same thing does not happen again."
The U.S. Wants to Sell, China Doesn't Want to Buy
What is striking is that even though the U.S. has recently allowed sales of certain Nvidia AI chips to China, actual purchases by Chinese firms have fallen short of expectations. The reason is that the Chinese government is effectively pushing companies to expand the use of domestic AI chips made by firms such as Huawei.
According to MoneyWise and TechRadar, the U.S. Department of Commerce recently approved sales of Nvidia's H200 AI chips to about 10 Chinese companies, including Alibaba, Tencent, ByteDance, and JD.com.
The market projected that, if sales took off in earnest, Nvidia could secure a Chinese market worth up to $30 billion (about 45 trillion won). John Vinh, an analyst at KeyBanc, also estimated that "demand for AI chips within China could expand to as many as 1.5 million units annually."
In reality, however, sales have hardly materialized. U.S. President Donald Trump recently told reporters, "China wants technology at a much higher level than the H200," adding, "China has chosen not to buy because it wants to develop its own technology."
The Chinese government is reportedly steering domestic firms toward using homegrown AI chips from companies such as Huawei. The strategy is to reduce dependence on U.S.-made semiconductors and build its own supply chain.
Some in the industry view this as a sign that, beyond simple export controls, the AI industry itself is splitting into separate U.S.- and China-centered ecosystems.
"Huawei Instead of Nvidia": China's AI Ecosystem Reshapes
Chinese AI companies are also shifting rapidly. DeepSeek, a Chinese AI startup, has optimized its latest AI model, recently unveiled, for Huawei's "Ascend" chips. ByteDance, the parent company of TikTok, also plans to expand its AI investment to around $30 billion next year, and a significant portion is expected to flow to Chinese chipmakers.
The price of Huawei's latest AI chip, the "Ascend 950PR," has reportedly risen by about 20 percent recently amid surging demand.
Voices within China are also raising concerns about potential security risks tied to using U.S.-made chips, wary that spyware or surveillance functions could be embedded as the chips pass through the U.S. supply chain.
Against this backdrop, Chinese AI models are quickly moving away from Nvidia chip-centric architectures and being optimized around Huawei chips.
Nvidia: "China Market Share Is Effectively 0%"
Nvidia, which once virtually monopolized the Chinese AI market, is unable to hide its sense of crisis.
CEO Jensen Huang recently said Nvidia's market share in China, once around 95 percent, has now fallen to nearly 0 percent. In its annual report, Nvidia also said it has been "effectively shut out of competition in China's data center market."
"Our current earnings outlook reflects almost no revenue from data centers in China," Huang said. "We are not placing high expectations on the Chinese market."
Since 2022, the U.S. has imposed strong restrictions on AI chip exports, citing concerns that "advanced AI technology could enhance China's military capabilities." Recently, however, growing analysis suggests that such regulations are instead accelerating China's semiconductor self-reliance and the expansion of a Huawei-centered supply chain.
On Wall Street, some assess that "Nvidia's real threat is not short-term earnings but China building an independent AI chip ecosystem."
