Is Hong Kong Serving Russia American Chips?

Is Hong Kong Serving Russia American Chips?
Semiconductor chips on a printed circuit board in an illustration picture taken on Feb. 17, 2023. (Florence Lo/Illustration/Reuters)
Kathleen Li
Ellen Wan

Twelve companies from mainland China or Hong Kong will be officially included in the U.S. sanctions list on April 17. At the same time, the media revealed that a Hong Kong company exported many electronic chips to Russia but has not yet been sanctioned. Some experts believe that there is not much difference between Hong Kong and mainland China, so the United States should re-examine its policy towards the former.

The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce will update its “Entity List” on April 17. Twelve companies located in mainland China or Hong Kong will be included in this update because these companies try to avoid U.S. export controls, which stipulate the limitations to acquiring or attempting to acquire U.S. products in support of Russian military activities. Some of the “to be listed” enterprises were found to purchase goods for Russian companies subject to U.S. sanctions or export controls.

However, the list of 12 companies to be sanctioned does not include at least two Hong Kong firms recently named by the media, Agu Information Technology (hereinafter referred to as Agu) and Dexp International Limited (from now on referred to as Dexp).

Agu and Dexp are two Hong Kong enterprises recently revealed by the media to be suspected of helping Russia obtain American chips via a detour. Such transaction information comes from the Russian customs data of the Indian research company Export Genius (EG) obtained by Nikkei Asia and published in a related report on April 12.

The report revealed that from Feb. 24, 2022 (the outbreak of the Russia-Ukraine War) to Dec. 31, 2022, Russia imported 3,292 semiconductor products, each costing more than US$100,000. 2,358 of these products were marked as products from Intel (INTC), Advanced Micro Devices (AMD), Texas Instruments (TXN), and other U.S. chip manufacturers. About 75 percent (1,774) of these 2,358 transactions were completed through companies in mainland China or Hong Kong, with a total transaction value of approximately US$570 million.

In 2021, there were only 230 transactions on U.S. chips between Hong Kong or mainland China, and Russia, with a value of US$5.1 million. This means that the scale of transactions has increased tenfold within one year.

Among them, Agu has six transactions between September and December 2022 involving more than 60,000 pieces of Intel semiconductors, with a total value of approximately US$18.7 million, including microprocessors with a unit price of US$13,000 with a Russian company called Mistral. Agu Hong Kong, a private company limited, was registered on April 11, 2022. The registered Chinese name of the company is 啊咕信息技術有限公司 (Agu Information Technology Co. Ltd.).

Since the outbreak of the Russo-Ukraine War, to limit the combat effectiveness of the Russian army, the United States banned the export of American-made chips to Russia, claiming such chips may be used in armaments to improve the speed and response capabilities of weapons. Although the CCP has repeatedly denied providing Russia with military equipment, chips that play a crucial role in military equipment are flowing from Chinese companies to Russia on an unprecedented scale.

Tokumori, president of a Japanese high-tech company, told The Epoch Times on April 13 that he was not surprised by the CCP’s actions. He said, “With the ongoing intensified competition and confrontation between the U.S. and China, the CCP will treat the U.S. and the EU as its main rivals.

And although Russia has now become a weakened entity, it can still distract the attention of the United States to a certain extent. In this way, the CCP still regards Russia as its heavyweight strategic partner in the struggle with the United States and the West,” he said.

“In addition, CCP leaders’ lingering memory and respect for the Soviet Union is still a factor that cannot be ignored. Therefore, when Russia is losing ground on the frontlines of the battlefield, the CCP is still willing to continue its support to Russia economically and materially,” he added.

Ways to Respond

Tokumori believes that the United States should consider the following options as its response. “First, there is no big difference between Hong Kong and mainland China anymore, so the U.S. government should start with a unified policy to treat both Hong Kong and mainland China,” he said.

He explained: “Originally, Hong Kong was a demonstration window of the ”one country, two systems” advocated by the CCP, with an independent legal system and a free market economy. Therefore, Western countries often regarded Hong Kong as the economic center of the East.

However, since the CCP government perfidiously penetrated and controlled Hong Kong in recent years, the Hong Kong government has since fully obeyed all CCP’s instructions and has become the main base for the CCP to deceive the Western world.

In this way, Western countries should no longer treat Hong Kong as a separate entity with freedom and the rule of law as before.

“Secondly, as the supply chain is already highly globalized, the U.S. government should check who is buying U.S.-made chips, should use the security and intelligence services available to collect as much information as possible, and share this information with companies so that they can have a better understanding of the risks involved.

Thirdly, “shell (readymade) companies” are often established and have little transaction history.

The U.S. government should review the qualifications of these chip trading companies, concluded Tokumori.

Agu Stance Unjustified

Agu was registered in Hong Kong in April last year (2022), and the telephone contact information provided on its website is a mobile phone number in mainland China.

When a reporter from The Epoch Times dialed the mobile phone number provided by Agu’s official website on April 13, a man with a mainland accent answered the phone. He admitted that it was Agu but claimed that the company’s business had changed to pulp import and no longer deals in the chips business. However, he did not respond to why the website still shows the interaction of electronic products.

Regarding when the chip business was stopped, the man claimed that it did not do it since the second half of 2022 and emphasized that the current business is pulp trading. But customs data shows that Agu’s six chip export transactions to Russia occurred between September and December 2022.

In addition, the registered address of the Agu Company is a building on Argyle Street, Mong Kok. Still, the name on the door plate is not Agu Information Technology, but some other trading company. In addition to confirming that it had done some chip business before, the man confirmed on the phone that the address was Agu’s official company address.

Corresponding Dexp Transaction Records Disappear

Dexp was established and registered in Hong Kong in 2018. From October to November 2022, it exported at least 13 times Intel and AMD semiconductors to one Russian electronic parts company called Atlas, involving an amount of US$2.53 million. Atlas is wholly owned by Russian billionaire Dmitry Alekseev, whom the Ukrainian government has called for his sanction.

A reporter from The Epoch Times found on April 13 in “NBD.Ltd Data” in Mainland China that Dexp was still exporting sub-32 nm microprocessors to Russia on Jan. 31 this year and took a screenshot of the web page. But on checking again on April 16, all the records of Jan. 31 had disappeared from the web page where Dexp’s records were initially displayed and replaced with the transaction records in February, with mainly Gigabyte motherboards. However, the original documents showing four transactions before Jan. 31 remain.

A screenshot of "NBD.Ltd "data on Jan.31, 2023, shows Dexp's export of sub-32 nm microprocessors to Russia. (Internet screenshot)
A screenshot of "NBD.Ltd "data on Jan.31, 2023, shows Dexp's export of sub-32 nm microprocessors to Russia. (Internet screenshot)

The “Dexp International Limited” registration information shows that a Russian citizen participated in the company’s creation and held all the shares until May 2022. The Hong Kong website “ sourcing” shows that Dexp’s contact person is Gleb Khitrin.

According to the company information provided by the Chinese recruitment website “BOSS Zhipin (direct hiring),” the legal representative of Shenzhen Dexipin Technology Co., Ltd. is also called Gleb Khitrin. Incidentally, there are also many similarities in the Chinese translation of Dexipin and Dexp. However, whether the two Khitrins are the same person is still unclear.

Shenzhen Dexipin is a client of a recruitment website and is shown to be currently looking for hardware test and electronic engineers. Shenzhen Dexipin was established on Oct. 11, 2022. The company’s address is in Anhongqi Xingyao Industrial Park in Longhua District, Shenzhen.

Kathleen Li has contributed to The Epoch Times since 2009 and focuses on China-related topics. She is an engineer, chartered in civil and structural engineering in Australia.
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