This report examines the prospect of large-scale smuggling of AI chips into China. AI chip smuggling into China is already happening to a limited extent and may involve greater quantities in the future. This is because demand for AI chips is increasing in China, while the US has restricted exports of cutting-edge chips going there. First, we describe paths such smuggling could take and estimate how many AI chips would be smuggled if China-linked actors were to aim for large-scale smuggling regimes. Second, we outline factors that affect whether and when China-linked actors would aim at large-scale smuggling regimes. Third, we propose six measures for reducing the likelihood of large-scale smuggling.

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Outline:

(01:01) Short summary

(03:45) Longer summary

(17:51) How the US typically enforces export controls

(29:21) Pathways and feasibility of large-scale smuggling

(31:16) All-things-considered view

(34:29) Routes into China

(35:16) Summary table of potential reexport countries

(37:39) Feasibility of surreptitiously procuring AI chips for reexport

(38:27) Methods of obtaining AI chips

(43:53) Challenges of large-scale smuggling

(46:41) Four factors determining procurement feasibility

(47:25) Demand for AI chips

(53:01) Rule of law

(54:16) Geopolitical alignment

(58:12) Common language

(59:05) Feasibility of surreptitiously transporting AI chips to China

(01:00:20) Sea, land, and air transport

(01:02:40) Clearing customs

(01:04:27) Import/export volume

(01:06:21) China's sides of its borders

(01:07:47) Two possible smuggling regimes

(01:09:28) Summary tables of estimates

(01:12:45) Why the scenarios only concern Nvidia GPUs

(01:13:52) Regime 1: Many shell companies buy small quantities from distributors

(01:15:12) Enforcement of controls if this regime is attempted

(01:18:27) Estimate

(01:23:03) Regime 2: Few cloud provider fronts buy large quantities directly from Nvidia/OEMs

(01:25:50) Enforcement of controls if this regime is attempted

(01:29:31) Estimate

(01:33:42) Will China-linked actors aim for large-scale AI chip smuggling?

(01:35:08) AI chip smuggling today

(01:36:54) Drivers of AI chip smuggling

(01:44:24) Recommendations for US policymakers

(01:47:12) Chip registry

(01:53:13) Increasing BIS's budget

(01:56:45) Stronger due diligence requirements for chip exporters

(01:59:20) Licensing requirement for AI chip exports to key third countries

(02:01:48) Interagency program to secure the AI supply chain

(02:03:30) End-user verification programs in Southeast Asia

(02:05:36) Discussion

(02:06:25) Limitations

(02:11:56) Further research

(02:15:27) Acknowledgments

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