Super Micro Co-founder Charged in $2.5B AI Chip Smuggling to China

Major Export Control Violation Uncovered

US authorities have arrested Yi-Hsiang "Wally" Liau, co-founder of Super Micro Computer, charging him with orchestrating a massive $2.5 billion operation to smuggle AI chip-equipped servers into China. The indictment was announced by the Department of Justice in a press release.

Two additional defendants have been named: Jui-Tsang "Steven" Chang, the general manager of Super Micro's Taiwan office, who remains at large, and third-party broker Ting-Wei "Willy" Sun, who has also been apprehended.

Why This Matters

The case exposes the sheer scale of illicit high-tech component trafficking amid the deepening technological rivalry between Washington and Beijing. Jay Clayton, US Attorney for the Southern District of New York, stated that such schemes generate billions of dollars in illegal profits and pose a direct threat to US national security.

The smuggling of advanced semiconductors undermines the export control regime that the United States has constructed to limit China's access to critical artificial intelligence technologies. This prosecution signals an intensified enforcement posture from American authorities.

How the Smuggling Network Operated

According to prosecutors, the defendants built a multi-layered logistics chain using an intermediary company. Liau and Chang allegedly directed executives at a firm in Southeast Asia to place orders for servers from a US manufacturer.

The equipment was assembled in the United States, then shipped to facilities in Taiwan. From there, the servers were forwarded to the intermediary company's locations in other Southeast Asian countries. In the final step, the products were repackaged into unmarked boxes to conceal their contents before shipment to end destinations in China.

Between 2024 and 2025, equipment worth $2.5 billion flowed through this pipeline. To deceive American compliance auditors, the conspirators fabricated thousands of counterfeit servers. Surveillance footage captured Sun personally supervising the swapping of serial number labels — workers used a hair dryer to remove them.

Criminal Charges Filed

All three defendants face conspiracy charges on three counts:

• Violating the Export Control Reform Act — carrying a maximum sentence of 20 years in prison;
• Smuggling goods from the United States — up to 5 years;
• Defrauding the United States — up to 5 years.

Years of Smuggling Warnings

Reports of restricted chip smuggling into China have surfaced repeatedly in recent years. In December 2024, the US Commerce Department reportedly contacted Nvidia to determine how its products were reaching China. Nvidia then asked major distributors — including Super Micro and Dell Technologies — to scrutinize their customers in Southeast Asia. Five different participants in smuggling operations claimed at the time that they had evaded detection during Super Micro's compliance checks.

In July 2025, reports emerged that approximately $1 billion worth of chips had been smuggled into China within just three months of the Trump administration tightening export controls. According to the Financial Times, B200 processors became the most popular and accessible product on the black market.

By December 2025, Nvidia had developed proprietary technology to verify the physical location of its processors. The tool analyzes latency in data exchanges with Nvidia's servers, leveraging confidential computing capabilities built into its GPUs. It was offered to customers on an opt-in basis, and the company announced plans to open-source the software for independent review.

Also in December 2025, Trump authorized the sale of H200 AI chips to "approved customers" in China and other countries, provided that the United States receives 25% of the profits.