South Korea's customs office has busted a chip smuggling operation that involved 53,000 chips worth $11.6 million, making it by value the biggest chip smuggling bust yet. This smuggling operation was so massive that an entire company known only as 'Company A' was behind it, rather than a single individual. All executives at the company have been charged by prosecutors for the crime, which was perpetrated over three years.
From August 2020 to August 2023, 'Company A' legally bought U.S.-made chips and imported them, also legally, to South Korea, according to BusinessKorea. Some of these chips were then smuggled by air to China in 144 individual trips, simply by not declaring them to customs. Although many smaller-scale smugglers have tried to bring consumer CPUs and GPUs into China in the past, this operation involved chips made to convert analog signals to digital. Because these chips could conceivably be used for weapons of mass destruction, they have been under export and import restrictions since 2020.
Of course, 'Company A' would have left a paper trail when purchasing these chips, but the company was able to keep its scheme under wraps by skimming off the top of a legitimate business. 'Company A' ordered more chips than it actually needed from official distributors of the communications processor. If every single one of these chips were being smuggled to China, it would have roused suspicions much sooner.
The smuggling operation is by far the largest ever busted in respect to value, and probably also in respect to quantity. The previous record holder was an attempt to smuggle $4 million worth of CPUs, SSDs, and other electronics from Hong Kong to China. The would-be smuggler similarly incorrectly declared his goods to customs officials, who weren't fooled and subsequently busted the plot.
A key difference with this South Korean smuggling operation compared to most others is that the goods were all successfully smuggled, and the crime wasn't discovered until months after it reportedly concluded. While the CEO and executives of 'Company A' will likely face serious consequences, the chips are presumably being used for purposes so far unknown, perhaps even inside weapons of mass destruction as the U.S. government fears.
The news comes amid an ongoing battle -- often deemed a chip war -- between the US, China, Taiwan, and others for control over the semiconductor industry, the world's most critical resource and a key component of a vast array of products, everything from PCs and data centers to cars, lightbulbs, refrigerators, and more.
