How DeepSeek Obtained Nvidia Blackwell Chips Despite US Export Ban
Chinese artificial intelligence startup DeepSeek has reportedly obtained approximately 2,000 of Nvidia's banned Blackwell chips through an elaborate smuggling operation, despite strict US export controls designed to prevent such transfers. The revelation comes as US prosecutors announce the dismantling of a separate $160 million smuggling ring targeting older-generation hardware, highlighting the ongoing challenge of enforcing semiconductor restrictions.
The alleged operation involved routing chips through data centers in third countries before dismantling servers and shipping components to China, according to sources cited by The Information. Nvidia has denied seeing evidence of the reported smuggling schemes, calling them "farfetched" while acknowledging the company investigates all tips received.
The Smuggling Mechanism
Phantom Data Center Strategy
The reported smuggling operation relied on a sophisticated multi-stage process that exploited regulatory gaps in international supply chains. According to investigative reports, Blackwell chips were first shipped to data centers in countries where their sale remains legal, then systematically dismantled and transported to China after clearing inspections by server equipment companies.
This approach differs significantly from traditional smuggling methods. Rather than attempting to move complete server systems, smugglers allegedly focused on eight-chip configurations weighing approximately the size of a large suitcase, far more portable than the 3,000-pound, 72-chip server racks typically deployed by US companies.
The chips reportedly passed through inspection processes in their host countries before being disassembled and shipped as individual components, obscuring their final destination and bypassing direct export restrictions.
Transit Hubs and Shell Companies
Singapore, Malaysia, and the United Arab Emirates have emerged as key transit points in the alleged smuggling network. Singapore authorities arrested three individuals in early 2025 on fraud charges linked to routing chips through a shell company called "Luxuriate Your Life Pte Ltd," which allegedly masked the true end-user of server equipment.
The operation demonstrates how transshipment hubs in Southeast Asia have become critical nodes for circumventing US restrictions. Singapore now accounts for 22 percent of Nvidia's revenue, up from 9 percent two years earlier, raising questions about the city-state's role in chip transfers.
Nvidia maintains that many customers have business entities in Singapore for invoicing purposes while products are shipped elsewhere, noting that actual shipments to Singapore represented less than 2 percent of fiscal year 2025 revenue.
Technical Advantages of Blackwell Hardware
The alleged acquisition of Blackwell chips would provide DeepSeek with significant computational advantages over domestic alternatives. Blackwell architecture includes specialized hardware designed for sparse attention computing, a technique central to DeepSeek's model development strategy.
This approach activates only specific portions of AI models when answering queries, rather than engaging entire networks. Blackwell processors can execute such calculations nearly twice as fast as traditional methods, dramatically reducing inference costs and making AI adoption more economically viable.
DeepSeek's models are specifically optimized for Nvidia hardware and software, making the use of Chinese alternatives less efficient for their architecture. The company began using Huawei Technologies chips for smaller models after export controls intensified, while continuing to rely on Nvidia processors for larger, more powerful systems.
DeepSeek's Hardware Timeline
DeepSeek originally trained its models using Nvidia A100 chips from 2020, with parent company High-Flyer Capital Management stockpiling 10,000 units before US export restrictions took effect in 2022. The company subsequently used Hopper-generation chips (H100, H200, H800) according to research papers from 2024.
The startup gained global attention in January 2025 with its R1 reasoning model, which demonstrated performance competitive with leading Silicon Valley offerings while claiming development costs at a fraction of US rivals. DeepSeek has publicly acknowledged using H800 chips that were legally available in China during 2023.
Access to next-generation Blackwell silicon would enable training of the company's upcoming models with significantly higher efficiency than domestic alternatives, potentially bypassing computational bottlenecks that have constrained other Chinese firms.
Enforcement Challenges
Operation Gatekeeper
While reports emerged of DeepSeek accessing Blackwell chips, US authorities this week announced charges in "Operation Gatekeeper," a case involving $50 million in smuggled H100 and H200 GPUs. Two men face charges for relabeling chips to evade export controls, utilizing straw purchasers to acquire hardware domestically before consolidating for export.
The investigation highlights the physical infrastructure supporting chip evasion, moving enforcement from policy discussions to criminal prosecutions targeting logistics networks. However, the focus on older-generation hardware suggests enforcement may be lagging behind current smuggling operations.
US Attorney Nicholas Ganjei characterized the enforcement action as critical to national security, stating the country that controls advanced chips will control AI technology and the future.
Policy Complications
Recent policy shifts have complicated enforcement efforts. President Trump this week authorized H200 exports to China subject to a 25 percent tariff, suggesting a transition from denial to revenue generation for older chips while maintaining security focus on Blackwell.
This bifurcation creates challenges for enforcement agencies, who must now distinguish between taxed exports and smuggled goods. The authorization drew immediate criticism from Republican lawmakers concerned that any relaxation of controls could accelerate China's AI capabilities.
House Select Committee Chairman John Moolenaar has previously characterized DeepSeek as an active threat to American interests, describing it as a weapon in the Chinese Communist Party's arsenal designed to spy on Americans and steal technology.
Industry Response
Nvidia's Position
Nvidia spokesperson statements emphasized the company has not seen substantiation of elaborate "phantom datacenter" smuggling schemes described in recent reports. The company noted it insists partners comply with applicable laws and acts accordingly when receiving contrary information.
The chipmaker acknowledged such scenarios are theoretically possible while emphasizing it actively investigates every credible tip regarding potential export control violations. Nvidia declined to comment on specific allegations linking its hardware to DeepSeek operations.
Geopolitical Tensions
Beijing continues defending its citizens' and companies' rights to access global technology, framing restrictions as unfair containment. Chinese authorities are simultaneously encouraging domestic companies building government-funded data centers to prioritize local AI chips over foreign products.
DeepSeek announced in September 2024 that it was collaborating with Chinese chipmakers on new model development, signaling expectations that domestically produced next-generation chips would become available in the near future.
Singapore's Ministry of Trade and Industry stated it expects US companies to comply with both American export regulations and Singapore's domestic legal framework, while emphasizing it upholds the rule of law and acts decisively against those who flout regulations.
Looking Ahead
The reported Blackwell acquisition reveals the persistent challenge of enforcing semiconductor restrictions in an interconnected global economy. As US prosecutors target previous-generation contraband, Chinese firms may already be accessing cutting-edge silicon through sophisticated international networks.
The effectiveness of export controls depends not only on policy design but on the ability to monitor and interdict complex supply chains involving multiple jurisdictions. The gap between enforcement actions and reported smuggling activities suggests ongoing challenges in maintaining technological advantages through export restrictions alone.
Future policy discussions will likely focus on strengthening oversight in transit countries, improving supply chain transparency, and balancing security concerns with commercial interests in legitimate semiconductor markets.
