The co-founder of Super Micro Computer was arrested last Thursday on federal charges alleging he masterminded a sprawling operation to smuggle $2.5 billion worth of Nvidia-powered AI servers into China, in what prosecutors are calling one of the most significant export control violations in the history of the U.S. semiconductor industry.
Yih-Shyan "Wally" Liaw, 71, who co-founded Supermicro in 1993 and served as its senior vice president of business development, was taken into custody alongside contractor Ting-Wei "Willy" Sun. A third defendant, Supermicro's Taiwan general manager Ruei-Tsang "Steven" Chang, remains a fugitive. The indictment, unsealed in Manhattan federal court, paints a picture of an operation that was as elaborate as it was brazen.
According to the Department of Justice, the scheme worked through a carefully constructed pipeline. Liaw and Chang would allegedly identify Chinese buyers seeking Nvidia GPU-equipped servers — hardware subject to strict U.S. export controls designed to prevent China from advancing its AI capabilities. They would then direct executives at an unnamed Southeast Asian company to place purchase orders with Supermicro, posing as the legitimate end buyer. The servers would be assembled in the United States, shipped to Supermicro facilities in Taiwan, and then forwarded to the Southeast Asian intermediary, which would strip identifying packaging, rebox the servers in unmarked containers, and route them onward to China.
The lengths taken to conceal the operation were remarkable. When Supermicro's own compliance team or U.S. Commerce Department auditors came looking, they found what appeared to be thousands of servers sitting in Southeast Asian warehouses exactly where they were supposed to be. In reality, they were elaborate fakes. Surveillance footage obtained by prosecutors allegedly shows Sun and a co-conspirator unboxing dummy servers and using a hair dryer to carefully peel serial-number stickers from shipping documents, reapplying them to the decoy units to pass inspection.
The scale of the alleged operation is staggering. Over the course of 2024 and 2025, approximately $2.5 billion in Supermicro servers flowed through the pipeline. In one particularly aggressive stretch from late April to mid-May 2025, roughly $510 million worth of U.S.-assembled servers were allegedly diverted to China in just three weeks.
The indictment also reveals that Liaw was pushing to escalate operations. In late 2024, he allegedly urged the Southeast Asian company to adopt Nvidia's more advanced B200 chips based on the Blackwell architecture, pressing them on monthly volume forecasts in text messages. When a broker sent him a news article about Chinese nationals being arrested for similar chip smuggling, Liaw allegedly responded with sobbing emojis.
The fallout was immediate. Supermicro's stock cratered 33 percent on Friday as investors absorbed the news. By the end of the day, Liaw had resigned from the company's board of directors. Chang was placed on administrative leave and Sun was fired from his contracting role. Supermicro, which is not named as a defendant, appointed DeAnna Luna — a former Intel executive — as acting chief compliance officer and said it is cooperating with the investigation.
The case arrives at a particularly fraught moment in the global AI chip wars. The U.S. government has spent years trying to restrict China's access to advanced semiconductors, viewing AI computing power as a matter of national security. Yet evidence continues to mount that controlled hardware is reaching Chinese entities through sophisticated smuggling networks, undermining the entire sanctions apparatus.
Nvidia, whose chips were at the center of the scheme, said compliance remains a "top priority" and that unlawful diversion is "a losing proposition across the board," noting that the company provides no service or support for illegally exported systems.
Jay Clayton, the U.S. Attorney for the Southern District of New York, framed the prosecution in stark terms. "Crimes involving sensitive technology must be met with swift action," he said in a statement. "Otherwise the law is meaningless."
Liaw was released on an unsecured bond following his initial court appearance in California, with a bond hearing scheduled for this Wednesday. Sun's detention hearing is set for Monday afternoon.
The case is being closely watched across Silicon Valley, where the message from prosecutors is unmistakable: the era of turning a blind eye to where AI hardware ends up is over.
