Chinese AI Firms Resort to Smuggling Hard Drives to Circumvent U.S. Chip Restrictions — Training Models in Malaysia on Rented Servers

Chinese AI companies are reportedly smuggling hard drives to Malaysia to sidestep U.S. export controls on Nvidia chips crucial for training AI models. A recent operation involved four tech workers transporting 15 hard drives each, containing 80 TB of data, totaling approximately 4.8 PB, enough for several large-scale language models. This clandestine operation took months to plan, with the engineers choosing physical transport over online transfer to avoid detection. Upon arrival, they utilized a rented Malaysian data center equipped with 300 Nvidia AI servers for processing. To further obscure their activities, the Chinese firm engaged in legal maneuvering by previously involving a Singapore-registered subsidiary. Although this approach complicates training compared to operations in China, heightened restrictions have forced companies to adapt. This situation highlights challenges in enforcing U.S. export bans, revealing a thriving black market for Nvidia chips and indicating that U.S. efforts to control exports are encountering significant obstacles.

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