U.S. Embeds Trackers in AI Chip Shipments to Stop Diversion to China

According to an exclisive Reuters report, U.S. authorities are secretly placing location trackers in select AI chip shipments to prevent unauthorized rerouting towards China.

Citing “informed sources,” the publication notes the measure targets servers that contain advanced Nvidia and AMD processors supplied by firms such as Dell and Super Micro.

These tracking devices are not found in every shipment but appear in those judged to pose significant risk of diversion to restricted destinations. They can be concealed inside the server packaging or even embedded within the servers themselves, according to people familiar with the matter.

Sometimes large devices are attached to shipping boxes accompanied by smaller trackers hidden inside. Industry insiders report having seen photos and videos of resellers removing trackers from hardware.

The operation is believed to involve the Department of Commerce’s Bureau of Industry and Security with potential support from Homeland Security Investigations and the FBI. The report notes that tracking shipments is a longstanding investigative tactic. Law enforcement has previously used this approach to monitor exports of sensitive items such as airplane parts.

The U.S. began tightening export restrictions on cutting-edge AI chips in 2022 to limit China’s ability to use such technology for military modernization or surveillance purposes. However despite legal bans, smuggling persisted via countries such as Malaysia Singapore the UAE and Taiwan.

Recent arrests including two Chinese nationals accused of shipping tens of millions of dollars worth of restricted chips via a California base have brought added scrutiny to enforcement gaps.

This subtle tracking strategy offers authorities a way to observe the journeys of suspect shipments and gather evidence to pursue legal action against wrongdoers. Because tracking can be done with or without notifying the company involved it raises questions about transparency and supply chain oversight.