New York authorities have charged three individuals linked to server manufacturer Supermicro with conspiring to smuggle advanced artificial intelligence chips into China, bypassing strict U.S. export controls aimed at protecting national security. The indictment, unsealed Thursday in the Southern District of New York, accuses Wally Liaw, Steven Chang, and Willy Sun of orchestrating a scheme that funneled $510 million worth of servers containing prohibited Nvidia GPUs to Chinese buyers through a Southeast Asian intermediary.
Liaw, a 71-year-old U.S. citizen and Supermicro co-founder who serves as senior vice president of business development and a board member, was arrested alongside Sun, a 44-year-old Taiwanese citizen described as a third-party broker. Chang, 53, a sales manager in Supermicro's Taiwan office and also a Taiwanese citizen, remains at large as a fugitive, according to the Department of Justice. The three face multiple felony counts, including conspiracy to violate the Export Controls Reform Act, which carries a maximum sentence of 20 years in prison if convicted. They are also charged with conspiracy to smuggle goods and conspiracy to defraud the United States, each punishable by up to five years behind bars.
According to the indictment, the men allegedly sold $2.5 billion in servers to a company in Southeast Asia, which then repackaged and redirected servers equipped with Nvidia's high-end B200 and H200 graphics processing units to final destinations in China without obtaining the required U.S. government licenses. These chips, among Nvidia's most advanced for AI applications, have been restricted from export to China since 2022 due to concerns over their potential use in military and surveillance technologies.
U.S. Attorney Jay Clayton emphasized the gravity of the allegations in a statement, saying, “They did so through a tangled web of lies, obfuscation, and concealment — all to drive sales and generate revenues in violation of U.S. law.” He added, “Diversion schemes like those disrupted today generate billions of dollars in ill-gotten gains and pose a direct threat to U.S. national security.” The charges highlight ongoing efforts by federal prosecutors to curb the flow of sensitive technology amid escalating U.S.-China tensions over technological supremacy.
The case stems from tightened export rules implemented in 2022 under the Biden administration, which barred sales of advanced AI semiconductors to China without special approval. These measures were designed to prevent the chips from bolstering China's AI capabilities, which U.S. officials view as a strategic risk. Nvidia's B200 and H200 GPUs, capable of handling massive computational loads for machine learning, fall squarely under these restrictions, with licenses rarely granted for direct exports.
Supermicro, founded by Liaw in 1993 and headquartered in San Jose, California, was not directly named in the indictment but confirmed the affiliations of the accused. In a statement to reporters, the company announced that Liaw and Chang have been placed on administrative leave, while its relationship with Sun, the external broker, has been terminated immediately. “The conduct by these individuals alleged in the indictment is a contravention of the Company’s policies and compliance controls, including efforts to circumvent applicable export control laws and regulations,” the statement read. Supermicro stressed its commitment to compliance, noting it maintains a “robust compliance program” and is “cooperating fully” with the government's investigation.
Nvidia, the chipmaker at the center of the smuggling allegations, reiterated its adherence to export laws in response to the charges. A spokesperson for the company said, “Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board — NVIDIA does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective.” The firm also described strict compliance as a “top priority” and mentioned ongoing collaboration with customers and authorities on export programs.
Efforts to reach the accused for comment were unsuccessful. Emails sent to Chang and Liaw went unanswered, and contact information for Sun could not be located. It remains unclear whether the men have retained attorneys to represent them in the case.
The alleged operation reflects broader challenges in enforcing U.S. export controls, particularly through so-called transshipping routes in Southeast Asia. A July report in the Financial Times estimated that China acquired approximately $1 billion in advanced AI processors in the three months following the initial tightening of restrictions under the Trump administration in 2018, often via indirect paths through neighboring countries. Experts suggest these diversions continue to undermine the effectiveness of the bans.
Chris McGuire, a senior fellow for China and emerging technologies at the Council on Foreign Relations, described the indictment as evidence of persistent vulnerabilities. “This operation is further evidence that China is aggressively stealing U.S. technology to help power its AI industry — which is unsurprising, given U.S. AI chips are far superior to any chips the Chinese can make,” McGuire said. He urged closer scrutiny of “glaring loopholes” in exports routed through Southeast Asia, arguing that the government must enhance monitoring to close these gaps.
The timing of the charges comes as U.S. policy on chip exports to China shows signs of nuance. In August, the White House approved limited sales of Nvidia's less powerful H20 chips to Chinese customers, on the condition that Nvidia share 15% of the revenue with the U.S. government. Earlier this year, Nvidia CEO Jensen Huang noted that small quantities of H200 products had been cleared for China-based clients by U.S. regulators. These developments suggest a pragmatic approach amid economic pressures, even as core restrictions on top-tier chips like the B200 remain firmly in place.
Supermicro, a key player in the data center and AI server market, has faced prior scrutiny over its supply chain practices. In 2018, the company was briefly delisted from Nasdaq amid accounting concerns raised by a Bloomberg report alleging Chinese espionage in its hardware, though those claims were later retracted. The current case, however, focuses squarely on export violations rather than security tampering.
Authorities have not disclosed additional details about the Southeast Asian intermediary or the specific Chinese end-users involved, citing the ongoing nature of the probe. The Justice Department indicated that the investigation, led by federal agents in New York, could expand to implicate other parties in the supply chain. For now, the arrests of Liaw and Sun mark a significant enforcement action in the tech export arena.
As the case proceeds to arraignment, it underscores the high stakes in the global race for AI dominance. With China investing heavily in domestic chip development to counter U.S. restrictions, incidents like this one illustrate the cat-and-mouse game between innovators and regulators. Legal experts anticipate a lengthy trial, potentially revealing more about how multinational firms navigate — or evade — international trade laws.
The broader implications extend to U.S. allies and trading partners in Asia, where transshipping hubs have proliferated. Policymakers in Washington are reportedly considering enhanced penalties and international cooperation to stem the flow of restricted tech. Meanwhile, companies like Supermicro and Nvidia continue to emphasize compliance, but the indictment serves as a stark reminder of the risks involved in global operations.