The United States House of Representatives released a deep investigation through the Select Committee on the CCP, pointing out that the Chinese Communist Party (CCP) is aggressively acquiring cutting-edge semiconductor and artificial intelligence (AI) capabilities through legal procurement and illegal smuggling. The report suggests that the United States should promote multiple legislations to plug export control loopholes in order to maintain its dominant position in critical technologies.
On Thursday, April 16, the House of Representatives released a deep investigation report titled “Buy What It Can, Steal What It Must” by the Select Committee on the CCP.
The report indicates that despite the CCP mobilizing national resources to pursue AI autonomy, its AI ecosystem still heavily relies on the supply chains of the United States and its allies for core components like chip manufacturing equipment, high-end chips, and model development.
Chairman of the committee, John Moolenaar, emphasized during the hearing, “AI is at the core of the U.S.-China competition, and both governments consider leadership in the AI field a top priority for national security.”
He pointed out that the CCP is attempting to acquire the complete AI tech stack to enhance military capabilities and resist foreign pressures.
The report revealed multiple instances of illegal acquisition of U.S. technology, with one of the most concerning being a $2.5 billion chip smuggling case, regarded as one of the largest export control violations in U.S. history.
Investigations showed that the co-founder of Super Micro, Wally Liaw, and his associates were suspected of using hairdryers to remove server serial number labels, sticking them on fake boxes, and even creating counterfeit servers to deceive law enforcement, making them believe that the chips were still in Southeast Asia when they had actually been shipped to China.
Additionally, the report listed several cases, including in August 2025, where two Chinese citizens in Los Angeles were charged with violating the Export Control Reform Act for allegedly exporting tens of millions of dollars’ worth of restricted AI chips to China through the shell company, ALX Solutions Inc. At least 21 batches of goods were transshipped through Singapore and Malaysia, with funds coming from Hong Kong and Chinese companies rather than the declared end-users.
In February 2025, after raids on 22 locations in Singapore, the police arrested 9 individuals and formally charged 3 of them, involving the transfer of Dell and Super Micro servers containing Nvidia chips to China. The report mentioned that the suspects used the shell company, Luxuriate Your Life Pte Ltd, as a false end-user.
In November of the same year, 4 defendants were arrested and charged with conspiracy to violate the Export Control Reform Act, smuggling, and money laundering. The report highlighted that they utilized the front company Janford Realtor LLC in Tampa, Florida, to export restricted Nvidia chips to China via Malaysia and Thailand, with funds amounting to $3.89 million wired from China.
The investigation found that China still has two legal ways to obtain U.S. compute power: by purchasing chips close to control thresholds (such as Nvidia L20 and L2) and by acquiring older-generation products (like H200) through individual licenses.
The report emphasizes that following the modification of control regulations in January 2026, companies like Alibaba, Tencent, and ByteDance could potentially acquire over 400,000 H200 chips.
The sales could undermine U.S. AI compute power since the components and factory capacity required for chip production are already tight. The chips exported to China consume the scarce investments that could otherwise support U.S. AI deployments.
Despite the Chinese government pouring in substantial subsidies, data shows that their independent R&D capabilities still face severe bottlenecks. According to officials’ estimates, Huawei is only expected to produce around 200,000 advanced AI chips in 2025.
The report cited research from the non-partisan think tank “Institute for Progress” (IFP), stating that the production yield of Huawei’s advanced logic chips is only about 5% to 20%, significantly lower than Nvidia’s Blackwell chips, which reach 60% to 80% yield. Adjusted for quality, the effective production capacity of the U.S. and its allies is 170 to 180 times more than that of China.
“Huawei recently announced the production of 750,000 Ascend 950PR chips – but this number, when adjusted for quality, is still less than a week’s production of U.S. AI chips,” said Moolenaar during the hearing.
“Given the significant differences in quality and quantity, Chinese AI companies continue to rely on U.S. chips. As the founder of the leading Chinese AI company DeepSeek mentioned, ‘Our problem has never been funding but the embargo on high-end chips,'” added Moolenaar.
Apart from the capacity gap in chips, there is also a substantial disparity in AI-specific high-bandwidth memory (HBM). As per the report, in 2025, the U.S. and its allies’ HBM output was about 3,090 times that of China. Even by 2026, with additional capacities in China, the projected HBM output of the U.S. would still be 70 times higher than China’s.
The investigation discovered that Chinese companies are exploiting policy loopholes by utilizing overseas data centers in Malaysia or Singapore to remotely train models using restricted U.S. chips.
Furthermore, the report accuses Chinese labs of utilizing Adversarial Distillation technology, under the cover of large-scale fake accounts, to extract inferencing capabilities from models developed by OpenAI, Anthropic, and Google.
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