HBM smuggling loophole lets Samsung and SK hynix memory reach China, report says

The trick, as described by Tom's Hardware on 3 November, is to build a low-performing server processor that sits inside US and South Korean export limits, then fit it with expensive HBM from Samsung and SK hynix. The rules judge the processor, not what is soldered beside it.

The chips travel to Hong Kong and then across the border to Shenzhen in the luggage of commuters, according to the report. Workshops there heat the boards, lift the memory off and throw the rest away. The failure rate is high. The price of HBM makes it worth doing anyway.

Seoul has a direct stake in the trade. Its export machine is running on memory. The Korea Customs Service reported on Sunday that October exports rose 93.7% year on year to a record $115.3 billion, with a $42.5 billion trade surplus, according to CNBC. Shipments reached $930 billion in the first 10 months of 2026, past $900 billion for the first time.

A budget built on chips and AI

President Lee Jae Myung used those numbers to sell a record budget on Monday. Total 2027 spending would rise 12.8% to 820.9 trillion won, he told the National Assembly, with 21.3 trillion won for semiconductors, physical AI and AI data centres, nearly double the 2026 level. A further 4.7 trillion won is earmarked for a sovereign AI model Lee called the "world's highest performance," and the government wants 2,000 trained specialists for semiconductor design and regional chip industries.

Lee said higher spending would produce "virtually no net increase in government debt," with new bonds used to repay existing debt. Defence spending rises 8.2% to 73.3 trillion won. The IMF expects South Korea to grow 3.3% in 2026, its fastest pace since 2021, CNBC reported.

The smuggling story sits awkwardly next to that plan. Control of advanced memory is the asset underwriting the budget, and the loophole runs through the products of the two companies the state is counting on.

Outside analysts have already warned that the boon is fragile. SCMP reported on 26 October that South Korea was urged to guard chip profitability as China's CXMT and YMTC gain market share.

Where memory demand comes from

Demand is not slowing. OpenAI chief executive Sam Altman made an unannounced visit to South Korea over the weekend of 31 October, meeting about 50 Samsung executives in Yongin, Samsung said. CNBC reported that South Korean media said he also met SK Group chairman Chey Tae-won over lunch, with SK Hynix and SK Telecom executives present. SK Hynix told CNBC it could not confirm the meeting. The visits build on Stargate-linked partnerships on advanced memory and AI data centres announced in October 2025.

Seoul is also pushing capital into its own startup base. Sifted reported on 30 October that the Ministry of SMEs and Startups named Daejeon, Gwangju, Ulsan and Daegu its first Startup Cities, with 17 centres for creative economy and innovation offering tax exemptions of 100% for a first three years and 50% for the next two.

Car exports are moving too. CnEVPost reported on 3 November that Xpeng appointed former Volvo Cars Korea executive Lee Man-sik as managing director of Xpeng Motors Korea from 1 December, with no launch timeline announced. Xpeng delivered a record 13,326 vehicles overseas in October, up 166% year on year.

The government's own export statistics make the stakes plain. A single month now turns on memory pricing, and a single loophole can route the product elsewhere.