Three men have been charged with illegally smuggling advanced AI chips into China
Three people associated with server maker Supermicro were indicted on Thursday in connection with allegations that they conspired to smuggle Nvidia chips into China, violating US export laws that prohibit their sale in China without a license.
An indictment from the U.S. Attorney for the Southern District of New York alleges that Wally Liaw, Steven Chang, and Willy Sun conspired to sell $2.5 billion worth of servers to a Southeast Asian company, which then repackaged the boxes to ship servers worth $510 million worth of banned chips to warehouses in China.
The Justice Department said Liaw, an American citizen who founded Supermicro, and Sun, a Taiwanese citizen, were arrested today while Chang, also a Taiwanese citizen, remains a fugitive.
The three men were each charged with conspiracy to violate the Export Controls Reform Act, and face up to 20 years in prison, if convicted. The three also face one count of conspiracy to smuggle and one count of conspiracy to defraud the United States, each punishable by up to five years in prison.
In 2022, the US tightened its export controls on the sale of advanced artificial intelligence chips to China, citing national security concerns. The ban covers Nvidia’s B200 and H200 graphics processing units, among the company’s most advanced AI chips, and is allowed to be sold in China only with a license granted by the government.
The three men face charges of selling servers, without a license, in China including B200 and H200 GPUs.
“They do this through elaborate lies, concealment, and concealment – all to facilitate sales and generate revenue in violation of American law,” said US Attorney Jay Clayton. “Diversion schemes like the one disrupted today generate billions of dollars in ill-gotten gains and threaten America’s national security.”
Chang and Liaw did not immediately respond to an emailed request for comment. Contact information was not available from Sun. It is not clear whether the men have lawyers to represent them.
Liaw, 71, founded Supermicro in 1993, and serves as senior vice president of business development and a member of the company’s board of directors. Chang, 53, is a sales manager based in the company’s Taiwan office, while Sun, 44, is described in the indictment as a “third-party seller and ‘fixer'” who worked with two others.
Supermicro was not named in the lawsuit, but the company confirmed the roles of the three individuals. In a statement, the company said the two employees are on administrative leave and the relationship with the contractor has been terminated, and will begin working immediately.
“The conduct of the individuals accused in their indictment is contrary to the Company’s policies and regulatory compliance, including attempts to circumvent applicable export control laws and regulations. Supermicro maintains a strong compliance program and is committed to fully complying with all applicable US export and re-export control laws,” the company said in a statement to NBC News.
Supermicro added that it is “cooperating fully” with the government’s investigation.
In a statement, Nvidia said strict compliance is “a top priority,” adding that it is working with customers and governments on compliance programs.
“The illegal diversion of US-controlled computers to China is a losing proposition – NVIDIA does not provide any service or support for these systems, and enforcement mechanisms are strict and effective,” said an Nvidia spokesperson.
The alleged plan comes amid concerns that banned chips are entering China, often being “exported” from China to nearby countries such as those in Southeast Asia. A Financial Times report last July estimated that China was able to secure nearly $1 billion worth of advanced AI processors in the three months after President Donald Trump tightened export controls.
Chris McGuire, senior fellow for China and emerging technologies at the Council on Foreign Relations, said the case shows that the government should take a closer look at “obvious loopholes” for exports through Southeast Asia.
“This operation is further evidence that China is aggressively stealing US technology to help its AI industry – which is not surprising, given that US AI chips are far superior to any Chinese chips,” McGuire said.
Recently, the Trump administration has warmed to allowing limited chip sales to China.
In August, the White House agreed to allow Nvidia to sell its H20 chips to China on the condition that it would share 15% of chip sales with the US government. Earlier this year, Nvidia CEO Jensen Huang said the sale of a small number of H200 products to Chinese customers had been approved by the US government.
