Washington, D.C. – The U.S. Department of Justice has announced the arrest of two Chinese nationals accused of illegally exporting advanced microchips used in artificial intelligence (AI) applications, in what officials are calling a serious breach of national security and trade laws.
The defendants, identified as Chuan Geng, 28, of Pasadena, California, and Shiwei Yang, 28, of El Monte, California, face federal charges under the Export Control Reform Act (ECRA), a statute designed to protect sensitive U.S. technologies from being unlawfully transferred abroad. The charges carry a maximum penalty of 20 years in federal prison if they are convicted.
According to prosecutors, Geng and Yang were part of a scheme to funnel tens of millions of dollars’ worth of restricted microchips to China without the necessary licenses or authorization, exploiting loopholes in international shipping networks to obscure their activities.
How the Scheme Worked
At the center of the alleged operation was ALX Solutions Inc., a California-based company founded by Geng and Yang. Court documents suggest the company was established shortly after the U.S. Department of Commerce implemented stricter licensing requirements on advanced microchips bound for China in 2023 and 2024.
ALX Solutions purportedly acted as a legitimate exporter of computing hardware. But prosecutors allege it was essentially a front used to obtain high-powered graphic processing units (GPUs) — the same chips critical for AI development — and reroute them illegally to China.
These GPUs are not ordinary consumer components. According to the DOJ’s affidavit, they are considered “the most powerful GPU chips on the market” and are specifically designed for high-intensity applications such as:
- Training AI models for self-driving cars.
- Medical diagnostic systems that rely on rapid computing.
- National defense systems that incorporate machine learning and simulation.
Given their strategic importance, the Commerce Department requires exporters to obtain a license before shipping them to China. ALX Solutions never applied for such licenses.
Instead, investigators allege that the company used transshipment hubs in Singapore and Malaysia to disguise the true end-users of the chips. Prosecutors say this tactic is a well-known method used by exporters attempting to bypass U.S. restrictions, as these hubs allow for re-labeling and re-routing of goods before reaching their ultimate destination.
Financial Red Flags
The financial trail uncovered by federal investigators added further suspicion.
Although ALX Solutions’ shipping records claimed that the GPUs were headed to specific international clients, those supposed buyers never made payments for the products. Instead, ALX received large sums of money from companies based in China and Hong Kong.
- In January 2024, a China-based firm wired $1 million to ALX Solutions.
- At least 20 prior shipments were tied to similar irregularities, with funds arriving from entities not listed as official buyers.
According to prosecutors, these payments make clear that the actual recipients were concealed, and that Geng and Yang were knowingly exporting restricted technology to China.
Arrests and Charges
Federal authorities moved in last week after gathering months of evidence. On Saturday, Geng voluntarily surrendered to law enforcement. That same day, Yang was arrested at his residence in El Monte.
Both men are charged with violating the Export Control Reform Act, which prohibits the unauthorized export of controlled goods and technologies. Each count carries up to 20 years in prison and significant fines.
“This case demonstrates the Justice Department’s commitment to protecting America’s cutting-edge technologies from theft and exploitation,” a DOJ spokesperson said. “Microchips are the backbone of modern innovation, and allowing adversaries to acquire them illegally poses risks not only to U.S. industry but also to national security.”
Why Microchips Matter
The case comes at a time when global competition over microchip technology is at its fiercest.
Microchips, particularly GPUs, are the engines behind artificial intelligence development. From military applications to commercial products like autonomous vehicles, whoever controls the most advanced chips has a strategic advantage.
The U.S. government has taken an increasingly aggressive stance in recent years to prevent China from accessing these components, citing fears they could be repurposed for surveillance, cyber warfare, or military systems.
- In October 2022, the Commerce Department expanded export restrictions on advanced semiconductors.
- In 2023 and 2024, licensing requirements were further tightened, closing loopholes and targeting companies suspected of acting as middlemen.
The alleged actions of Geng and Yang, therefore, cut directly against these national security efforts.
The Broader U.S.-China Tech Rivalry
This case highlights a broader geopolitical struggle between the United States and China over dominance in the tech sector.
- For the U.S., keeping its most advanced technologies out of Chinese hands is seen as essential to maintaining both military and economic superiority.
- For China, access to such chips is critical for fueling its rapid AI development and achieving self-sufficiency in semiconductor production.
China has invested billions in developing its domestic chip industry but continues to lag behind the U.S. and its allies in producing high-end processors. Allegations of intellectual property theft, espionage, and illegal exports have been a recurring feature of the dispute.
Just last year, another DOJ indictment targeted a Chinese national for allegedly stealing source code related to autonomous driving technology from an American company.
National Security Concerns
Experts say the case of ALX Solutions illustrates the ongoing challenge of enforcing export controls in a globalized supply chain.
“Even with strict regulations, determined actors will look for creative ways to move sensitive technology across borders,” said Dr. Michael Torres, a national security analyst based in Washington. “Transshipment hubs like Singapore and Malaysia are particularly problematic because once goods enter, they can be easily re-routed with falsified paperwork.”
Torres added that the involvement of front companies, like ALX Solutions, makes enforcement even more complex. “On the surface, they look legitimate. But when you start following the money and the paperwork, it becomes clear who the real beneficiaries are.”
What Comes Next
Geng and Yang are expected to appear in federal court in California for their initial hearings. Prosecutors are likely to argue that both men are flight risks, given their ties to China and the seriousness of the charges.
If convicted, they could face decades in prison and forfeiture of assets connected to the alleged scheme.
Meanwhile, the Department of Commerce and DOJ are expected to use this case as a warning to other companies and individuals considering circumventing U.S. export controls.
“This should send a clear message: we are watching, and we will act,” the DOJ spokesperson emphasized.
Conclusion
The arrest of Chuan Geng and Shiwei Yang underscores the high stakes in the global battle over advanced technology. As the United States works to safeguard its technological edge, cases like this reveal the lengths to which some actors will go to secure restricted innovations for foreign powers.
With microchips at the heart of both the global economy and modern warfare, the fight over who controls them is more than just about commerce — it is about the balance of power in the 21st century.
As this case heads to trial, it is likely to draw international attention, serving as both a test of U.S. enforcement efforts and a stark reminder of the growing tensions in the U.S.-China relationship.