Two Chinese nationals, one of whom was reportedly caught in the country illegally, have been arrested in California for smuggling American-made microchips to China.
The Justice Department announced that 28-year-old Chuan Geng, a legal permanent resident in America, and Shiwei Yang, an illegal alien who overstayed her visa, are accused of secretly exporting tens of millions of dollars’ worth of sensitive GPU chips, vital components in AI systems, to a company called ALX Solutions.
According to federal investigators, the scheme ran from October 2022 to July 2025. The suspects allegedly bypassed strict exportation requirements set by America’s Department of Commerce by routing shipments through Singapore and Malaysia – common stopovers for black-market exports eventually destined for China.
ALX Solutions reportedly received payments not from the countries it shipped to, but from entities in Hong Kong and mainland China, including a $1 million transfer in early 2024.
The Justice Department also claims the duo knowingly mislabeled the shipments and failed to obtain required export licenses, despite the microchips being classified as “controlled for national security purposes.”
The technology in question includes some of the most powerful AI chips on the market, designed for uses ranging from medical diagnostics to self-driving vehicles, and beyond.
In another troubling detail, authorities say the ALX Solutions company was founded shortly after new export rules for AI chips took effect, a move they argue shows intent to exploit regulatory loopholes from the jump.
While the legal investigation remains ongoing, the case has already raised serious concerns about the enforcement of export controls, as well as the potential national security risks posed by other countries operating within our tech industry.
Geng has been released on a $250,000 bond, while Yang remains in custody pending a detention hearing. Arraignment is scheduled for September 11.
The FBI and the Department of Commerce are still investigating the details surrounding the microchip smuggling scheme and who was ultimately behind the large illegal microchip orders.