Three people associated with server maker Supermicro were indicted Thursday on charges of conspiring to smuggle advanced NVIDIA chips into China, violating U.S. export regulations that prohibit sales to China without a license.
According to an indictment filed by the U.S. Attorney for the Southern District of New York, Wally Liau, Stephen Chan, and Willy Sun conspired to sell $2.5 billion worth of servers to a Southeast Asian company, which then repackaged the boxes and shipped $510 million worth of servers containing the banned chips to their final destination in China.
The Department of Justice announced that Mr. Liau, a U.S. national and Mr. Sun, who co-founded Supermicro, and Mr. Sun, a Taiwanese national, were arrested today, while Mr. Chan, also a Taiwanese national, remains at large.
The three men are each charged with conspiracy to violate the Export Control Reform Act, which carries a maximum penalty of 20 years in prison if convicted. The three men were also charged with one count each of conspiracy to smuggle goods and conspiracy to defraud the United States, each of which carries a maximum penalty of five years in prison.
The United States has tightened export controls on the sale of advanced artificial intelligence chips to China in 2022, citing national security concerns. The ban targeted Nvidia’s B200 and H200 graphics processing units, one of the company’s most advanced AI chips, which could only be sold to China through a government-granted license.
The three are accused of selling servers, including B200 and H200 GPUs, to China without a license.
“They did so through a complex mix of lies, obfuscation, and concealment, all to increase sales and increase profits in violation of U.S. law,” said U.S. Attorney Jay Clayton. “Virgin schemes like the one currently thwarted generate billions of dollars in ill-gotten gains and pose a direct threat to the national security of the United States.”
Mr. Chan and Mr. Liau did not immediately respond to emailed requests for comment. No contact information was found for Sun. It was not immediately clear whether the men had lawyers who could argue on their behalf.
Mr. Liau, 71, co-founded Supermicro in 1993 and serves as senior vice president of business development and a member of the company’s board of directors. Mr. Chan, 53, is a sales manager based at the company’s Taiwan branch, and Mr. Sun, 44, is described in the indictment as a “third-party broker and ‘fixer'” who worked with two others.
SuperMicro was not named in the indictment, but the company acknowledged the three people’s roles. The company said in a statement that the two employees are on leave and that the relationship with the contractor has been terminated with immediate effect.
“The conduct by these individuals alleged in the indictment violates our policies and compliance controls, including efforts to circumvent applicable export control laws and regulations. Supermicro maintains a robust compliance program and is committed to full compliance with all applicable U.S. export and reexport control laws and regulations,” the company said in a statement to NBC News.
Supermicro added that it is “fully cooperating” with the government’s investigation. The company’s stock price plunged in pre-market trading, dropping more than 25%.
Nvidia said in a statement that strict compliance is its “top priority,” adding that it is working with customers and governments on compliance programs.
“The illegal diversion of controlled U.S. computers to China is a bad proposition overall. NVIDIA does not provide any service or support for such systems, and our enforcement mechanisms are rigorous and effective,” an Nvidia spokesperson said.
The alleged scheme comes amid concerns that banned chips are making their way into China, often being “transshipped” into the country via neighboring countries such as Southeast Asia. A Financial Times report last July estimated that China had secured about $1 billion in advanced AI processors in the three months since President Donald Trump tightened export controls.
Chris McGuire, senior fellow for China and emerging technologies at the Council on Foreign Relations, said the indictment shows the government needs to take a closer look at “obvious loopholes” in exports through Southeast Asia.
“This operation is further evidence that China is actively stealing American technology to strengthen its own AI industry, which is not surprising given that American AI chips are far superior to anything made by China,” McGuire said.
More recently, the Trump administration has moved toward allowing limited chip sales to China.
In August, the White House agreed to let Nvidia sell more limited H20 chips to China on the condition that it share 15% of chip sales with the U.S. government. Earlier this year, NVIDIA CEO Jensen Huang said the U.S. government had approved small-volume sales of the H200 product to customers based in China.
