Fake server subcontracting, the biographer reveals the shady story of Huida chip smuggling

Huang Renxun's extramarital affair has raised suspicions that Huida chips were lost through Southeast Asia through washing production. Biographer Witte pointed out that the Malaysian data center involved in the case may have subcontracted "fake servers" and then shipped real chips to China through the back door, which is beyond the reach of US supervision.

"The New York Times" (The New York Times) technology podcast (Podcast) Hard Fork interviewed Stephen Witt, author of "The Thinking Machine" (The Thinking Machine) and technology reporter, to analyze the vulnerabilities in the chip supply chain.

Witte, who lives in Singapore, said that the data center involved in the case is just across the coast from Singapore in the Malaysian state of Johor, only about 30 minutes' drive away. However, such high-standard facilities are heavily guarded and cannot be accessed by outsiders, making it difficult to find out what is happening within the high walls of the computer room.

Nvidia CEO Jen-Hsun Huang recently admitted that he had an extramarital affair with Alice Huang, a senior executive at Singapore-based data center company Megaspeed. The U.S. government accused her of being a Chinese spy. The U.S. Department of Commerce investigated whether Megaspeed smuggled Huida chips into China, and the entire case was handed over to the Department of Justice late last year.

In response to the relevant accusations, a representative of Megaspeed previously responded to the New York Times and stated that the company has launched a special investigation and has repeatedly expressed its willingness to fully cooperate with the U.S. government.

● Malaysia has become a transshipment point for chip smuggling

Vitter bluntly said that the New York Times disclosed more than a year ago that the Malaysian data center is essentially a transfer station for smuggling chips to China. This has long been a tacit secret in the industry. He analyzed that Malaysia does not have a huge AI development plan. If Huida has as much as 10% to 15% of its revenue coming from Malaysia, it means that these chips will eventually flow to the Chinese market through various channels.

He further explained that the industry generally speculates on two methods. One is that after the high-end chips arrive at the Malaysian data center, the labels are immediately removed and replaced with fake labels, and they are directly transported into mainland China through smuggling. The other possibility is that the Malaysian data center builds a computing computer room and essentially provides all of them to specific Chinese entities for remote leasing.

● From hair dryer tearing off labels to fake servers hiding the truth

Witte pointed out that setting up shell companies abroad is a typical smuggling tactic to circumvent export controls. For example, he gave an example of a case earlier this year where employees from the major server manufacturer Super Micro Computer gathered outer boxes filled with Huida equipment, used hot air from a hair dryer to soften the glue, completely removed the original factory shipping labels, and then put on fake labels to deceive others.

As for the Megaspeed case, although many details still need to be clarified, Witt revealed that one of the suspected methods used was to set up "fake servers" in data centers. When Huida's high-end equipment arrived, the operators claimed to have completed the "installation" on the surface, but the racks were actually filled with equipment that had no function or had been pieced together, thereby creating the illusion that the computer room was operating at full capacity; the real Huida's top-end equipment was secretly shipped out the back door, loaded into trucks, and transported to a secret location somewhere in China.

Witt pointed out that even leaving aside the fake servers, Megaspeed itself seems to be a downstream partner of Alibaba, and Alibaba seems to be a major customer of Megaspeed's computing power resources. He believes that it depends on how the regulations are interpreted, but he believes that this also violates U.S. export controls because the law explicitly prohibits companies from using this to make roundabout purchases.

● U.S. regulatory oversight is beyond its reach to prevent chip manufacturing from being laundered overseas

Talking about the difficulty of investigation and arrest, Vitter admitted that the U.S. Department of Commerce, which is responsible for law enforcement, is in a difficult situation overseas. At best, U.S. officials can only confirm that the initial sales target and transportation destination of the chips are indeed the data center in Malaysia, and that the factory actually exists. However, once the chips enter the computer room gate, the U.S. government has neither law enforcement power nor substantive supervision capabilities abroad, and has very limited control over the subsequent flow.

As for whether Megaspeed is purely a shell company, Witte explained that Megaspeed was established around 2023, and Huida publicly announced in the same year that it was the "preferred cloud partner" and enjoyed priority distribution rights. Megaspeed has indeed built a large physical data center that consumes an astonishing amount of power, and there are indeed real customers renting and paying for computing power. "From this point of view, it is a company that is operated by entities." However, who is renting computing power behind the scenes, who is the sponsor behind the scenes, and how legal the entire business is is still a mystery.

● Isn’t it strange that the origin-washing technique has long been seen in Southeast Asia?

Although the United States has only now made major efforts to thoroughly investigate this smuggling chain that "transports to China through Southeast Asia's washing production areas," in the eyes of Singapore and surrounding industries, the general reaction is "Why did it take until now to expose this?"

Witte pointed out that Singapore law enforcement authorities have successively uncovered similar chip smuggling groups as early as 2024. This underground network has been operating in secret for a long time and is not considered a secret locally.

However, he also expressed support for the local industry. Many residents living in Singapore cross the sea to work in Johor, Malaysia every day. Putting aside the individual involvement of Megaspeed, Malaysia has emerged as a regional data center in recent years. Not only is the industry large-scale, but it also creates a large number of job opportunities. It is the economic backbone of the local pride. The outside world should not turn the entire industry into a transnational criminal group.

Witte finally emphasized that as far as he knew, Huida had significantly tightened controls this year. Perhaps it was aware of the political risks of this type of resale, so it strictly required major data centers to submit customer certificates to ensure that the end users were legal and not in China.

However, in response to this storm, Witt said bluntly: "It is simply unbelievable to say that Huang Renxun is unaware of all the operations." (Compiled by Zhang Mingxuan)