Three individuals, including a senior vice president of Super Micro Computer Inc., have been charged with conspiring to smuggle billions of dollars' worth of advanced computer servers containing Nvidia chips to China.
The indictment, presented in Manhattan federal court, alleges that the defendants violated U.S. export control laws by planning to divert significant quantities of high-performance servers manufactured in the United States to China between 2024 and 2025.
According to James C. Barnacle Jr., Assistant Director of the FBI, the accused utilized forged documents and set up fake equipment to mislead audit inventories, employing a pass-through company to disguise their illegal activities and the identities of their actual clients.
U.S. Attorney Jay Clayton expressed that such schemes pose a direct threat to national security.
Nvidia's processors are vital components in the data centers that support artificial intelligence, a transformative technology that is reshaping various sectors and altering global power dynamics. The competition between the U.S. and China over AI technology has drawn comparisons to the historical arms race during World War II, where both nations vied to develop nuclear weapons.
To maintain an advantage, President Joe Biden has enforced restrictions on the sale of Nvidia's AI chips to China, a ban that was originally upheld during Donald Trump's presidency. In the previous year, the Trump administration began easing restrictions on lower-tier AI chip sales to China, provided a 15% commission is paid to the U.S. government. Despite this concession, Nvidia did not include any potential sales to China in its latest financial outlook.
Among the accused, Yih-Shyan “Wally” Liaw, 71, a U.S. citizen and senior vice president at Super Micro Computer, was arrested in California alongside Ting-Wei “Willy” Sun, 44, a contractor for the company. Ruei-Tsang “Steven” Chang, a sales manager in Taiwan, remains at large. Liaw has been released on bail, while Sun, a Taiwanese citizen, is awaiting a bail hearing. The representation of the accused is currently unclear.
The indictment states that Liaw and Chang instructed Southeast Asian company executives to order $2.5 billion worth of servers from Super Micro Computer during the 2024-2025 timeframe.
As the scheme progressed, authorities claim it became increasingly blatant, with at least $510 million worth of these servers being redirected to China after assembly in the United States.
While the indictment did not name the company involved, Super Micro Computer Inc. confirmed in a statement that the individuals arrested were affiliated with them.
“The actions taken by these individuals, as alleged in the indictment, violate our company's policies and compliance controls, including attempts to evade applicable export control laws and regulations,” the company stated. “Supermicro has a strong compliance program and is dedicated to adhering fully to all U.S. export and re-export control laws.”
Additionally, the company emphasized that it is not facing indictment and is fully cooperating with the ongoing government investigation.
Nvidia also remarked that strict compliance is a top priority. “We are actively collaborating with our customers and the government on compliance initiatives as export regulations have tightened. The unlawful diversion of controlled U.S. computers to China is detrimental for everyone involved — NVIDIA does not offer any services or support for such systems, and the enforcement measures are robust and effective,” the company stated.
Despite the absence of sales to China, Nvidia's performance has surged during the past three years, with its market value escalating from approximately $400 billion at the end of 2022 to $4.3 trillion today, making it the most valuable company globally.
Earlier this week, Nvidia CEO Jensen Huang indicated that the AI industry is set for continued growth, predicting a backlog of chip orders reaching $1 trillion, a figure that has doubled from his estimate a year prior.
Source: SecurityWeek News