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From Smuggling Scheme Uses Low-End Processors to Bypass Chip Export Rules

How could the HBM smuggling scheme affect the Association of Southeast Asian Nations?

Possible What happens if… A possibility worth considering, not a forecast.

The HBM smuggling scheme may undermine regional trade integrity in Southeast Asia. The smuggling scheme involves packaging houses in Southeast Asia that bond high-bandwidth memory (HBM) from Samsung and SK hynix with deliberately useless processors. This process allows the packages to be exported from Southeast Asia, exploiting a gap in US Bureau of Industry and Security (BIS) export regulations. By circumventing these controls, the scheme undermines the integrity of cross-border trade and the regulatory stability that the Association of Southeast Asian Nations seeks to maintain across the region.

Reported by 1 independent outlet Written Yesterday
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How it reaches Association of Southeast Asian Nations

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The facts so far

As reported. Each one links to where it comes from.

  • Smugglers pair Samsung and SK hynix HBM with deliberately useless processors to pass export regulations as a low-end chip.techradar.com
  • Packaging houses in Taiwan, South Korea and Southeast Asia reportedly bond the memory and the processor onto a single substrate.techradar.com
  • The scheme exploits a December 2024 BIS exclusion for co-packaged chips, which only applies 'where the dominant function' is processing.techradar.com
  • The memory stacks are sold for about $4,000 a stack, mostly to Huawei customers.techradar.com

Why it matters

The integrity of regional trade is central to the Association of Southeast Asian Nations' mandate. This smuggling scheme represents a sophisticated method of circumventing international trade controls, using the region's manufacturing and logistics infrastructure to move high-value restricted technology. If such regulatory gaps are exploited widely, it could erode trust in regional trade frameworks and increase the risk of illicit economic activity.

This activity is part of a broader trend of circumventing US export controls, which has seen other companies face investigations, such as TSMC facing a US investigation in 2024 after a chip was found in a Huawei product. The incentives described in the report are real, driven by a voracious Chinese AI memory appetite and the high cost of memory for AI accelerators.

What we don't know yet

  • Will the US Bureau of Industry and Security close the regulatory gap exploited by this scheme?
  • Will the Association of Southeast Asian Nations issue specific guidance regarding the use of its territory in such high-tech smuggling operations?

What would change this answer

The US Bureau of Industry and Security clarifies the 'dominant function' test for co-packaged chips.The scheme would become significantly harder to execute, reducing the risk and profitability of the operation.
The smuggling operation becomes institutionalized across multiple Southeast Asian nations.The challenge to regional trade integrity would become stronger and more systemic for the Association of Southeast Asian Nations.

Who else could feel it

Other possible ripples from the same event.

Reporting

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The full eventSmuggling Scheme Uses Low-End Processors to Bypass Chip Export Rules Everything aboutAssociation of Southeast Asian Nations

Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.