Three individuals linked to Supermicro have been charged for allegedly smuggling high-end Nvidia chips to China, violating U.S. export laws. The U.S. Attorney’s Office in New York claims Wally Liaw, Steven Chang, and Willy Sun planned to sell over $2.5 billion worth of servers to a Southeast Asian company that would then send banned chips to China.
Liaw, a U.S. citizen and co-founder of Supermicro, along with Sun, a Taiwanese citizen, were arrested, while Chang remains at large. The charges include conspiracy to breach the Export Controls Reform Act, which could lead to 20 years in prison. Each also faces counts for smuggling and fraud against the U.S., with sentences of up to five years for those charges.
In 2022, the U.S. tightened restrictions on exporting sophisticated AI chips to China due to national security concerns. The bans focused on Nvidia’s B200 and H200 graphics processing units, which require a government permit for any sale to China.
U.S. Attorney Jay Clayton highlighted that the defendants manipulated legal frameworks to achieve their aims. “Diversion schemes generate billions in illegal profits and threaten U.S. security,” he stated. Also, while unable to reach Chang, Liaw and Sun had not responded to requests for comment, and their legal representation was unclear.
Liaw, now 71, helped found Supermicro in 1993 and serves as a senior vice president. Chang, 53, handles sales out of Taiwan, while Sun, 44, is described as a broker involved with the other two.
Although Supermicro itself wasn’t indicted, the company confirmed the allegations and stated that the implicated employees are now on leave. They emphasized their commitment to following U.S. export laws.
Reflecting on the allegations, Nvidia stated that compliance with regulations is a priority and warned against illegal diversions. “We do not support unauthorized systems, and enforcement is strict,” said a spokesperson.
Concerns about banned chips reaching China have been growing, with reports of them transshipping through nearby Southeast Asian countries. A Financial Times piece from last July estimated that China acquired about $1 billion in restricted AI processors shortly after stricter export controls were put in place.
Experts are calling for stronger oversight. Chris McGuire from the Council on Foreign Relations noted that the indictment underscores existing loopholes in export regulations. He asserted that the U.S. needs to address how technology transfers to China can undermine its own tech industry.
Interestingly, there have been recent moves toward allowing some sales to China. The Trump administration approved Nvidia’s sale of H20 chips on the condition that the company shares a portion of earnings with the U.S. government. In early 2023, Nvidia’s CEO announced that limited sales of H200 products to Chinese customers were also approved.
Overall, this case emphasizes the ongoing tug-of-war between national security and global market dynamics, revealing complexities in tech trade that reflect today’s geopolitical landscape.
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