U.S. authorities have covertly inserted location monitoring devices in specific shipments of cutting-edge chips they believe are highly likely to be illegally diverted to China.
The procedures are only applicable to certain shipments that are being investigated and are intended to identify instances of AI chips being diverted to locations that are subject to U.S. export restrictions.
Even while the Trump administration has attempted to loosen some limitations on Chinese access to cutting-edge American semiconductors, they demonstrate the extent to which the United States has gone to enforce its export limits on chips to China.
The trackers can be used to develop cases against individuals and businesses that profit from violating U.S. export regulations.
U.S. law enforcement agencies have been using location trackers, a decades-old investigative technique, to track goods like airplane parts that are subject to export restrictions.
They have been employed in recent years to stop the unlawful diversion of semiconductors.
The usage of the trackers in shipments of servers from companies like Dell and Super Micro, which include processors from Nvidia and AMD, is something that five additional individuals actively involved in the AI server supply chain say they are aware of.
According to those individuals, the trackers are usually concealed in the server shipments’ packaging.
They had no idea who was responsible for their installation or where they were placed on the shipping route.
It has been difficult to ascertain when U.S. authorities began utilizing the trackers to look into chip smuggling or how frequently they have been used in investigations pertaining to chips.
In 2022, the United States began to impose restrictions on the sale of cutting-edge chips made by Nvidia, AMD, and other companies to China.
A shipment of Dell servers with Nvidia chips in 2024 contained both huge trackers on the shipping boxes and smaller, more covert devices concealed inside the packaging — and even inside the servers themselves.
Also seen were pictures and videos of other chip resellers removing trackers from servers made by Dell and Super Micro.
Some of the larger trackers were about the size of a smartphone.
Homeland Security Investigations and the Federal Bureau of Investigation may also be involved, in addition to the usual involvement of the U.S. Department of Commerce’s Bureau of Industry and Security, which is in charge of export controls and enforcement.
Neither the FBI nor the HSI would comment. Requests for comment were not answered by the Commerce Department. According to the Chinese foreign ministry, the issue was unknown to them.
“Security practices and policies in place to protect our worldwide operations, partners, and customers” are not disclosed by Super Micro, according to a statement. It declined to comment on any tracking efforts by U.S. authorities.
“A U.S. Government initiative to place trackers in its product shipments” is something Dell claimed to be unaware of.
AMD did not respond to a request for comment, and Nvidia declined to comment.
RESTRICTIONS ON CHIP
In an effort to curb China’s military development, the United States, which controls the world’s supply chain for AI chips, has recently attempted to restrict the shipment of chips and other technology to China.
To undermine war activities against Ukraine, it has also placed limits on the sale of semiconductors to Russia.
To prevent semiconductors from being diverted to nations where U.S. export laws limit sales, the White House and both chambers of Congress have suggested mandating that U.S. chip companies embed location verification equipment in their chips.
China has criticized the location tracking proposal and slammed the U.S. export restrictions as part of a campaign to stifle its rise.
Last month, the country’s powerful cyberspace regulator called a meeting with Nvidia to discuss the company’s concerns about the possibility that its chips contain “backdoors” that would allow for remote access or control, a claim the company has vehemently denied.
In January, it was reported that the U.S. had tracked organized AI chip smuggling to China through nations like Malaysia, Singapore, and the United Arab Emirates. It is unclear if tracking devices were involved.
U.S. law enforcement has been using trackers for decades.
Hughes Aircraft transferred equipment that was subject to U.S. export regulations in 1985, according to a court ruling.
According to the ruling, the U.S. Customs Service inserted a tracking device after intercepting the container at an airport in Houston while carrying out a search warrant.
Sometimes, after receiving administrative authority, U.S. export enforcement officers install trackers.
In other instances, they obtain a warrant from a judge allowing them to use the device. It is simpler to use the information as evidence in a criminal case when a warrant is obtained.
If a corporation is not under investigation, they may be informed about the tracker and may agree to the government installing the trackers.
However, they may also be unaware that the gadgets have been implanted.
Those who were involved in the diversion of export-controlled shipments of servers and chips to China admitted to knowing about the devices.
According to two supply chain sources, who are resellers of export-controlled chips based in China, they routinely check shipments of AI chip servers that have been diverted for the trackers because of the dangers of the embedded devices.
One co-conspirator allegedly told another to look for trackers on Quanta H200 servers, which contain Nvidia chips, according to an affidavit included in a U.S. Department of Justice complaint about the arrests of two Chinese nationals accused of illegally shipping tens of millions of dollars’ worth of AI chips to China earlier this month.
It stated that Yang Shiwei, one of the defendants, received the English-language text from a co-conspirator whose name was censored.
The individual continued by using profanity to disparage the Trump administration, saying, “Pay attention to see if there is a tracker on it; you must look for it carefully.” “Who knows what they will do.”
