American authorities are secretly embedding location trackers in AI chip shipments to prevent illegal diversions to China. This marks a significant escalation in the ongoing technology war between the two superpowers.
According to Reuters, US officials place tracking devices in select shipments from companies like Nvidia, AMD, Dell, and Super Micro. The trackers target high-risk deliveries already under investigation. These devices help build cases against individuals and companies violating export rules.
The tracking initiative involves multiple federal agencies. The Bureau of Industry and Security, part of the Commerce Department, oversees export controls and regulations. Leads the effort. Homeland Security Investigations and the FBI provide additional support. These agencies enforce export restrictions and gather evidence against violators.
Why It Matters Now
The US has tightened export controls on China since 2022. These restrictions aim to limit China’s military development capabilities. Similar controls apply to Russia as well. The tracking program shows how far authorities will go to enforce these rules.
Location tracking isn’t new for sensitive exports. US law enforcement has long monitored aeroplane parts shipments. In recent years, the focus shifted to semiconductors. The current emphasis targets advanced AI chips specifically.
Trackers are concealed within packaging or inside servers themselves. Some devices measure roughly the size of smartphones. Two sources told Reuters about a 2024 incident involving Dell servers. Large trackers were attached to boxes containing Nvidia chips. Smaller devices were hidden inside packaging and servers.
Strategic Advantage
Five people in the AI server supply chain confirmed awareness of tracker usage. They’ve seen devices in shipments from Dell and Super Micro. These servers contain chips from Nvidia and AMD.
Chinese resellers appear increasingly aware of tracking efforts. Court documents reveal suspects instructing associates to check for trackers. One co-conspirator warned to “look carefully” for monitoring devices on servers. This awareness shows the cat-and-mouse nature of enforcement.
Super Micro declined to comment on security practices related to tracking. The company stated it doesn’t disclose policies protecting operations and customers. Dell expressed different awareness levels. “Dell said it was not aware of a US Government initiative to place trackers in its product shipments,” according to the report.
Market Impact in India
The tracking program affects global AI chip supply chains. Indian companies importing AI servers might encounter similar monitoring. The US leads global AI chip manufacturing and distribution. These controls influence pricing and availability worldwide.
Recent reports indicate billion-dollar black markets for Nvidia products. Chinese buyers openly trade restricted semiconductors despite export controls. This underground economy drives enforcement efforts, such as tracking programs.
The Trump administration initially relaxed some restrictions on Chinese semiconductor access. However, tracking programs continue operating under current policies. This suggests bipartisan support for monitoring advanced technology exports.
What Business Leaders Should Know
Companies in AI supply chains should expect continued scrutiny. Export compliance becomes increasingly essential for businesses. Violations may lead to criminal charges and civil penalties.
Nvidia CEO Jensen Huang consistently denied chip diversions to China. However, multiple outlets confirm that strong black markets exist. The disconnect between official statements and market reality complicates compliance efforts.
Chinese authorities recently called in Nvidia regarding alleged chip “backdoors.” The company denied these claims. Meanwhile, China’s cyberspace regulator urged local companies to avoid Nvidia H20 chips. These developments heighten tensions in the semiconductor sector.
Proposed legislation would require location verification technology in chips. Nvidia opposes this requirement, citing security vulnerabilities. The company argues permanent tracking creates hacker targets.
The tracking program represents operational reality for technology companies. Export controls shape business strategies and supply chain decisions. Companies must balance compliance costs with market opportunities.
Industry observers note the strategic importance of AI semiconductors. These chips enable both civilian and military applications. Control over advanced semiconductors translates to technological advantage.
The situation underscores intense global competition in technology sectors. US authorities actively work to maintain control over leading-edge innovations. This approach likely increases tensions between competing nations.
Businesses should prepare for continued export control evolution. Tracking programs may expand to other sensitive technologies. Compliance programs need updating to address new enforcement methods.
