Chinese entities circumventing advanced-chip export controls via smuggling and cloud-rental workarounds, with estimated 40,000-50,000 restricted units already in-country

A June 2023 CNAS report documents that blacklisted Chinese entities, including the country's top nuclear weapons lab, are obtaining US-origin restricted semiconductors through smuggling networks and cloud-rental intermediation, despite the Biden administration's fall 2022 export controls targeting AI and supercomputing chips. The authors cite recent reporting indicating Chinese small businesses are smuggling chips through neighboring countries, with 40,000 to 50,000 such units already in circulation in China. This evidence suggests that performance-threshold-based chip export controls may face structural enforcement challenges even with extraterritorial coverage of US-origin technology.