U.S. Secretly Embeds Tracking Devices in High-Risk AI Chip Shipments to Combat Illegal Diversion to China

U.S. authorities have quietly deployed location-tracking devices in select shipments of advanced semiconductors deemed at high risk of being illegally diverted to China, according to two individuals with direct knowledge of the previously undisclosed enforcement tactic.

The devices are intended to identify AI chips that may be redirected to destinations under U.S. export restrictions. The measure, applied only to shipments already under investigation, underscores the lengths to which Washington has gone to enforce semiconductor export controls — even as the Trump administration has signalled a willingness to relax certain curbs on Chinese access to advanced U.S.-made chips.

According to the sources, the trackers are part of efforts to build cases against individuals and companies profiting from violations of U.S. export laws. While location trackers have long been used in cases involving controlled goods — such as aircraft components — their use to combat the illegal diversion of semiconductors has intensified in recent years.

Five other individuals active in the AI server supply chain said they were aware of tracking devices being embedded in shipments of servers from manufacturers including Dell and Super Micro, which contain chips made by Nvidia and AMD. The trackers are typically concealed within shipping packaging, and in some instances, smaller devices are hidden inside the servers themselves. The sources said they were unaware of exactly where or by whom the trackers were installed.

Reuters could not determine how frequently such trackers have been deployed or when the practice began in chip-related investigations. The U.S. first imposed restrictions on the sale of high-performance chips from Nvidia, AMD, and others to China in 2022.

In one 2024 case described by industry sources, a shipment of Dell servers containing Nvidia chips included both large trackers on the exterior of shipping boxes and smaller, more discreet devices embedded within the servers. Another source described images and videos of trackers being removed from Dell and Super Micro servers, noting that some of the larger devices were roughly the size of a smartphone.

The Bureau of Industry and Security (BIS) at the U.S. Department of Commerce, which oversees export control enforcement, is typically involved, with Homeland Security Investigations (HSI) and the Federal Bureau of Investigation (FBI) sometimes participating. The FBI and HSI declined to comment, while the Commerce Department did not respond to inquiries. The Chinese Foreign Ministry also offered no immediate comment.

Super Micro stated it does not disclose its security protocols, Dell said it was “not aware” of any U.S. government initiative to place trackers in its shipments, and Nvidia declined to comment. AMD did not respond to requests for comment.

Chips, Restrictions, and Geopolitics
The United States, which dominates the global AI chip supply chain, has moved to restrict the export of advanced chips and related technology to China in a bid to slow its military modernisation. Similar restrictions apply to Russia in an effort to disrupt its war effort in Ukraine.

The White House and U.S. lawmakers have discussed requiring semiconductor makers to include location-verification technology with their products to prevent diversion to restricted destinations. Beijing has denounced U.S. export controls as an attempt to hinder China’s rise, and last month, its cyberspace regulator reportedly summoned Nvidia to express concerns about potential “backdoors” in its chips — allegations Nvidia has strongly denied.

In January, Reuters reported that U.S. authorities had traced organised AI chip smuggling to China via countries including Malaysia, Singapore, and the UAE, though it is unclear if tracking devices were involved in those cases.

The use of trackers in export enforcement is not new. In a 1985 case, Hughes Aircraft equipment subject to export controls was intercepted by U.S. Customs and fitted with a tracking device before being allowed to continue to its destination. Trackers may be installed with administrative approval or by court warrant, the latter making their data easier to use as criminal evidence.

Sometimes companies are informed and consent to the installation, but trackers can also be deployed without the shipper’s knowledge.

Smugglers on Alert
Sources involved in illicit diversions of AI chips and servers to China said they are aware of the tracking devices. Two China-based resellers of controlled chips said they routinely inspect shipments for embedded trackers to mitigate the risk.

A recent U.S. Department of Justice complaint described a case in which two Chinese nationals were charged with illegally shipping tens of millions of dollars’ worth of AI chips to China. An affidavit in the case quoted a co-conspirator warning an associate to inspect Quanta H200 servers — which contain Nvidia chips — for trackers: “Pay attention to see if there is a tracker on it, you must look for it carefully. Who knows what they will do.”