Trump administration secretly embeds trackers in AI shipments to China to catch smugglers in tech war crackdown

The Trump administration is cracking down on illegal AI chip shipments to China by placing tracking devices inside the packages.

U.S. authorities are tracing AI chips that are being diverted from their destinations by smugglers and sold to countries with export restrictions, according to a report from Reuters.

Even after President Donald Trump loosened regulation on Chinese access to American semiconductors, the trackers are still being used by the administration to build a case against individuals, as well as companies earning profits by violating US trade restrictions.

Sources told Reuters the trackers are placed in shipments of servers from large U.S. chip makers, including Nvidia and AMD. Moreover, server manufacturers such as Dell and Super Micro are equipped with US trackers.

The tracking devices are reportedly placed in the packaging of the server shipments.

A variety of US agencies are involved in the effort, including the Bureau of Industry and Security, Homeland Security Investigations, and the Federal Bureau of Investigation.

The report was unable to determine when the trackers are installed on the chips during the shipping process.

However, in one case, trackers were placed inside the packaging of a shipment of Dell servers with Nvidia chips. Authorities even found a way to hide the trackers within the servers themselves, Reuters reported.

US authorities often place the tracking devices inside the packaging of AI chip shipments

In recent years, the White House has placed restrictions on US chip manufacturers from exporting to China and Russia

Trump made a deal earlier this week to allow Nvidia and AMD to sell certain chips to China

For decades, law enforcement has used location tracking devices to combat semiconductor smugglers seeking to evade US trade restrictions.

In 2022, the U.S. began barring the sale of AI chips manufactured by Nvidia and AMD to China.

Chip smugglers have, in some cases, discovered the tracking devices and removed them from Dell and Super Micro servers. Reports state the largest trackers were approximately the size of a cell phone.

Following the report, Dell released a statement claiming the company is ‘not aware of a U.S. Government initiative to place trackers in its product shipments.’

Meanwhile, Super Micro told Reuters it will not discuss its ‘security practices and policies in place to protect our worldwide operations, partners, and customers.’

The U.S. has sought to control the flow of AI chip exports in recent years to curb China’s technological advancement of its military. Restrictions were also placed on Russia following the invasion of Ukraine.

Homeland Security and the Justice Department are involved with the AI chip tracking effort

In the past, congressional lawmakers have urged U.S. chip makers to install location verification technology on their products to help combat smugglers.

Despite these restrictions, Trump on Monday made a deal with Nvidia and AMD to ship certain AI chip products to China.

The companies agreed to pay the US government 15 percent of their revenue from sales of AI chips. The White House indicated on Tuesday that future deals could be on the table for other chip makers.