US Justice Department accuses two Chinese men of trying to smuggle Nvidia chips
![Item 1 of 2 H100, Nvidia's GPU optimized to handle large artificial intelligence models used to create text, computer code, images, video or audio is seen in this photo, Santa Clara, CA, U.S., September 2022. NVIDIA/Handout via REUTERS [1/2]H100, Nvidia's GPU optimized to handle large artificial intelligence models used to create text, computer code, images, video or audio is seen in this photo, Santa Clara, CA, U.S., September 2022. NVIDIA/Handout via REUTERS Purchase Licensing Rights, opens new tab](/_next/image?url=https%3A%2F%2Fwww.reuters.com%2Fresizer%2Fv2%2FO5S5CYHKTJNN5HEK47O7DIHZ6Y.jpg%3Fauth%3D2578609918788093c6fc797bef489675552387e7d14dbd9eefa9666d65b5ef12%26width%3D1200%26quality%3D80&w=1920&q=75)
News Summary
The U.S. Justice Department announced on Monday that two Chinese men have been arrested for allegedly smuggling Nvidia H100 and H200 chips to China. The accused, Fanyue Gong (43, a Chinese citizen) and Benlin Yuan (58, a Canadian citizen from China), are alleged to have conspired with employees of a Hong Kong logistics company and a China-based AI technology company to circumvent U.S. export controls. Prosecutors claim Gong and his co-conspirators obtained Nvidia chips through straw purchasers and intermediaries, falsely stating the goods were for U.S. or third-country customers (like Taiwan and Thailand). The chips were relabeled at U.S. warehouses with a fake company's name before being prepared for export. Yuan is accused of helping recruit and organize inspectors for the mislabeled chips and instructing them to conceal China as the final destination. The scheme is estimated to have operated since at least November 2023. Another individual, Alan Hao Hsu, and his company pleaded guilty in October for their role, having received over $50 million from China to fund operations that attempted to export at least $160 million worth of controlled Nvidia chips. The Justice Department characterized this as a "sophisticated smuggling network" threatening U.S. security. Notably, the report also states that President Trump has given Nvidia the green light to export H200 chips to Beijing.
Background
Since 2022, the U.S. government has implemented stringent export controls to restrict China's access to advanced semiconductor chips manufactured with U.S. equipment. These measures aim to curb China's technological advancement in artificial intelligence and high-performance computing, as advanced chips are considered crucial for military modernization and economic competitiveness. In September 2025, the Trump administration further expanded its restricted export list to automatically include subsidiaries owned 50% or more by a listed company, signaling a continued tightening of technology export policies towards China. Nvidia's H100 and H200 chips are among the most powerful AI Graphics Processing Units (GPUs) currently available, essential for training large AI models and performing complex computations, making them key targets for U.S. export controls.
In-Depth AI Insights
What does the timing of this prosecution, alongside the recent H200 chip export approval, reveal about the Trump administration's strategy regarding tech controls on China? - This suggests a more nuanced strategy: On one hand, the administration may be making limited policy adjustments in specific areas (like H200 exports) to manage relationships with U.S. companies and secure some market share. - On the other hand, the severe crackdown on smuggling sends a clear signal: circumvention of existing or prior controls will be met with harsh penalties, thereby upholding the overall authority and effectiveness of U.S. export controls. - This "carrot and stick" approach aims to maintain strategic pressure on China's technological advancement while avoiding excessive damage to U.S. tech companies and potentially offering leverage in future tech alliances with other nations. How might this incident impact the broader U.S.-China technology competition and the perceived effectiveness of export controls? - This prosecution reinforces the U.S.'s determination to enforce its dominant position in the global semiconductor supply chain. It demonstrates that the U.S. can track and combat evasion even through sophisticated underground networks, potentially enhancing the perception of the "teeth" behind U.S. export controls. - Conversely, the long duration of the smuggling network (since November 2023) also highlights the difficulty and persistence of circumvention efforts, suggesting that a complete blockade of advanced technology to China is nearly impossible, and China will continue to seek alternative routes. - For investors, this implies that U.S.-China friction in advanced technology will persist long-term, and relevant companies will continue to face compliance and geopolitical risk premiums. In the long run, what implications do such incidents have for the restructuring and diversification of the global semiconductor supply chain? - Incidents like this undoubtedly accelerate the "de-risking" and regionalization of the global semiconductor supply chain. Nations, especially China, will further increase investment and support for their domestic semiconductor industries to reduce reliance on specific countries or suppliers. - Multinational tech companies will face greater pressure for more transparent and auditable supply chains, potentially prompting them to divest or adjust their operating models to comply with differing regional regulatory requirements. - Investors should focus on companies that can benefit from supply chain diversification, possess localized production capabilities, or specialize in non-controlled technology sectors, as these companies may exhibit greater resilience amidst future geopolitical risks.