News June 24,2025 | Independence Journal Editorial Team

Did China Firm ILLEGALLY Dodge U.S. Chip Bans?

A senior U.S. official has accused Chinese AI startup DeepSeek of illegally acquiring restricted Nvidia chips and directly supporting China’s military, exposing new weaknesses in U.S. export-control enforcement.

At a Glance

• DeepSeek allegedly used Southeast Asian shell companies to import restricted Nvidia H100 chips

• The company is listed over 150 times in Chinese military procurement records

• U.S. officials claim DeepSeek is actively supporting PLA and intelligence systems

• DeepSeek’s models are seen as major technical breakthroughs trained on banned chips

• The U.S. has not yet sanctioned DeepSeek, though congressional pressure is building

Shell Companies, Hidden Chips, and Military Links

According to Reuters, a U.S. State Department official confirmed that DeepSeek accessed Nvidia H100 processors—explicitly restricted for export to China—by routing them through Southeast Asia–based shell companies and foreign cloud providers. These chips, used to train state-of-the-art AI models, are central to the firm’s reported support of China’s military and intelligence operations.

DeepSeek, based in Hangzhou, appears over 150 times in People’s Liberation Army procurement records, according to the official. He stated the company “willingly provided and will likely continue to provide” AI capabilities to China’s defense and surveillance infrastructure. Despite public denials of using restricted chips, the evidence points to a deliberate evasion of U.S. policy.

Watch a report: How DeepSeek May Be Fueling China’s Military AI.

Tech Leap or Chips Loophole?

DeepSeek emerged in early 2025 claiming its models—DeepSeek-V3 and R1—rivaled U.S. equivalents at a fraction of the cost. Their training reportedly cost just $5–6 million, a feat that prompted analysts to label the moment a “Sputnik-level” breakthrough. The result was a near-$1 trillion loss in U.S. chip market value within days of the launch.

While some U.S. voices, like entrepreneur David Sacks, argue that such breakthroughs mean export controls may backfire, others—like Anthropic’s Dario Amodei—insist the DeepSeek case shows why stricter chip restrictions are necessary to preserve America’s edge.

U.S. Response and Future Risk

As of now, DeepSeek remains unlisted on any U.S. blacklist. But calls for action are rising. The House Select Committee on China has urged tighter export controls and enhanced tracking of GPU sales, especially via cloud service intermediaries. Illinois Rep. Bill Foster is reportedly preparing new legislation to reinforce chip-tracing and plug evasion channels.
If no immediate action is taken, officials warn, more Chinese startups could follow DeepSeek’s path—training AI on prohibited U.S. hardware while advancing Beijing’s military-industrial complex.

What Comes Next

As scrutiny mounts, the Commerce and State Departments may fast-track measures to block DeepSeek’s access to American technology. Meanwhile, lawmakers are expected to introduce bills mandating new reporting requirements for U.S. chipmakers and foreign cloud hosts.
This case raises urgent questions: Can export controls keep pace with global AI development? And how far behind is China’s military AI—if at all?

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