Singaporean authorities arrested three individuals on Thursday for allegedly smuggling Nvidia chips to China, shedding light on China’s ongoing efforts to bypass U.S. export restrictions. The arrests also highlight how diligently American tech companies are working to enforce those trade controls.
Among those arrested on February 27 were two Singaporeans and a Chinese national, Li Ming. Li has been charged with fraud for making false representations, while his Singaporean accomplices face charges of criminal conspiracy to commit fraud.
Last week, Singapore police and customs agents conducted coordinated raids across 22 locations, resulting in six additional arrests. Authorities seized a trove of paper and electronic records as part of an ongoing effort to dismantle illicit chip-smuggling operations.
The Smuggling Operation
Investigators revealed that the scheme involved purchasing high-end computers containing restricted Nvidia chips under the guise of selling them to legitimate buyers in Malaysia. However, instead of reaching their stated destination, the Dell and Supermicro servers were secretly rerouted to China.
The crackdown gained urgency after China recently unveiled its DeepSeek artificial intelligence system, which stunned industry experts by delivering near top-tier AI performance at a fraction of the expected cost. The Chinese government hailed DeepSeek as a breakthrough that could revitalize the country’s struggling economy and technological sector—despite years of restrictive political crackdowns.
DeepSeek’s debut sent shockwaves through global markets, as its creators claimed they could achieve AI advancements at unprecedentedly low costs. If true, this would significantly lower the barrier to entry into the competitive AI market, threatening the business models of major tech firms. Stock prices for several key players in the AI sector tumbled as a result.
China framed DeepSeek as a monumental victory in the so-called tech wars, crediting its success to Chinese ingenuity and the leadership of the Chinese Communist Party. However, since its launch, DeepSeek’s performance claims have been questioned, and the software has come under fire for embedding invasive surveillance and Communist Party censorship.
U.S. Probes Nvidia Chip Leaks
In February, the U.S. Department of Commerce (DOC) launched an investigation into whether DeepSeek was developed using Nvidia chips acquired illegally. While it is confirmed that Nvidia hardware powers DeepSeek, its creators insist that all chips were obtained legally and were not part of the restricted export list.
The DOC probe identified Malaysia, Singapore, and the United Arab Emirates (UAE) as likely conduits for smuggled AI chips.
“It appears that a substantial fraction of DeepSeek’s AI chip fleet consists of chips that haven’t been banned (but should be), chips that were shipped before they were banned, and some that seem very likely to have been smuggled,” said Dario Amodei, CEO of AI firm Anthropic.
Nvidia, for its part, emphasized its commitment to compliance. “We insist that our partners comply with all applicable laws, and if we receive any information to the contrary, we act accordingly,” the company said in a statement.
The Singapore Connection
A report from the Rand Corporation pointed to the DeepSeek case as evidence of the need for smarter export controls, calling for tighter regulations, increased oversight on chip manufacturers, and a crackdown on illicit trade routes.
“Maintaining U.S. leadership in computing power is one of the best tools for countering Chinese AI ambitions, though it must be part of a broader strategy,” Rand advised.
Singaporean officials now appear to be moving against what they describe as a shadow network of illicit chip smugglers. While Singapore is a major distribution hub for Nvidia products, many of these high-end components are legally shipped there before being redirected to other markets. Criminal conspiracies like the one exposed on Thursday rely on falsified documents to illegally divert restricted hardware to China.
Nvidia has acknowledged the challenges of monitoring its supply chain in Singapore. The company noted that while the country accounts for about 18% of its customer billing, only 2% of its shipments end up in the hands of end-users there—a discrepancy that suggests Singapore is often used as a staging ground for re-exports.
Industry analysts warn that an expanded U.S. crackdown—potentially including an outright ban on all Nvidia exports to China and stricter oversight of third-party transactions—could cost the company up to $5 billion in annual revenue. Nvidia has already reported significant losses due to the current trade restrictions.
Singapore’s Position on Export Restrictions
Singaporean authorities have made it clear that while they do not endorse the country being used as a backdoor for circumventing U.S. export laws, they are under no legal obligation to enforce American trade policies. However, they do intend to prosecute cases involving fraud and false representation—offenses that carry prison sentences of up to 20 years.
With the latest arrests and ongoing investigations, it is evident that the international crackdown on chip smuggling is escalating. As the U.S. tightens its grip on semiconductor exports, China’s desperate hunt for high-performance AI chips is only expected to intensify.
