Supermicro Co-Founder Charged in $2.5 Billion AI Chip Smuggling Scheme

Executive Arrested in Massive Tech Smuggling Operation

Federal prosecutors have charged Yih-Shyan "Wally" Liaw, who co-founded Supermicro in 1993 and serves as senior vice president of business development and board member , with orchestrating an elaborate scheme to smuggle billions of dollars worth of advanced artificial intelligence chips to China. The 71-year-old U.S. citizen was arrested Thursday in California , sending shockwaves through Silicon Valley's AI ecosystem.

The indictment alleges that Liaw conspired to sell $2.5 billion worth of servers to a Southeast Asian company, which then repackaged $510 million worth of servers with banned chips for final destinations in China . The server company's products containing Nvidia chips "are subject to strict U.S. export controls barring their sale to China without a license" due to national security and foreign policy concerns .

The news sent Supermicro shares plummeting 33% on Friday, erasing more than $6 billion from the company's market value . Liaw has since resigned from the board effective immediately .

Sophisticated Deception Network

During 2024 and 2025, Liaw allegedly worked with Taiwan sales manager Ruei-Tsang "Steven" Chang to find Chinese buyers, directing executives at an unnamed Southeast Asian company to place purchase orders with Supermicro as though they were destined for that company's operations . The servers would be assembled in the U.S., shipped to Supermicro's Taiwan facilities, delivered to the Southeast Asian company, then handed off to shipping companies that would remove identifying packaging and put the servers in unmarked boxes before sending them to China .

The scheme involved efforts to evade scrutiny by auditors from both Super Micro and the U.S. government, including by falsifying records and setting up "dummy" servers to which they removed and affixed serial numbers with a hair dryer . When a broker sent Liaw a text message about Chinese nationals being arrested for smuggling AI chips into China, Liaw allegedly responded with sobbing emojis .

The business proved lucrative, with the unnamed Southeast Asian company becoming Supermicro's eleventh most profitable customer globally in the fourth quarter of fiscal 2024 . However, the rapid growth raised eyebrows internally, prompting Supermicro to impose a temporary hold on shipments and order an audit in late 2024 .

Legal Consequences and Industry Impact

The three men are each charged with conspiring to violate the Export Controls Reform Act, carrying a maximum 20-year prison term, plus additional charges of conspiring to smuggle goods and defraud the United States, each carrying up to five years . Chang remains a fugitive while contractor Ting-Wei "Willy" Sun was also arrested .

Supermicro is not named as a defendant in the indictment , and the company stated that the alleged conduct "is a contravention of the Company's policies and compliance controls" . The company has placed the employees on administrative leave and terminated its relationship with the contractor .

This case highlights the ongoing challenges in enforcing U.S. export controls on advanced semiconductor technology. The alleged scheme comes amid concerns that banned chips are slipping into China through "transshipping" via Southeast Asian countries, with estimates suggesting China secured about $1 billion in advanced AI processors in just three months after export controls were tightened . The prosecution sends a clear message that violations of these critical national security measures will face severe consequences, potentially reshaping how tech companies approach compliance in the rapidly evolving AI landscape.