By Raffaele Huang and Katherine Hamilton
Employees of a U.S. server maker helped smuggle machines with high-end Nvidia chips to China and used dummy devices to deceive an American inspector, according to a U.S. indictment unsealed Thursday.
The server maker, Super Micro Computer, said it placed co-founder and Senior Vice President Yih-Shyan "Wally" Liaw on leave after learning of his alleged role in the scheme involving billions of dollars of servers. Super Micro said it placed a second employee on leave and fired a contractor.
In premarket trading Friday, shares of Super Micro were down 20%.
The case involves one of the most sensitive issues in U.S.-China relations. In recent years, Washington has blocked China from importing Nvidia's most advanced artificial-intelligence chips. The goal is to preserve America's technology lead over Chinese companies developing AI models.
Some Chinese companies have found workarounds to get Nvidia chips by routing shipments through third countries, The Wall Street Journal and others have reported. The new indictment offers one of the most detailed pictures of how this is allegedly done.
The three defendants helped smuggle servers into China "through a tangled web of lies, obfuscation, and concealment -- all to drive sales and generate revenues in violation of U.S. law," said U.S. Attorney Jay Clayton for the Southern District of New York.
Super Micro, which wasn't named as a defendant, said the alleged conduct of the accused contravened its policies and compliance controls. The company said it would continue to cooperate with the investigation and maintain compliance. Nvidia said strict compliance was a top priority.
The servers were assembled in the U.S. and shipped to Super Micro's facilities in Taiwan before being delivered to customers, according to the indictment.
Two Super Micro employees -- Liaw and Ruei-Tsang "Steven" Chang -- allegedly directed a company based in Southeast Asia to place orders with Super Micro for the servers. After receiving the servers, the Southeast Asian company repackaged the servers and shipped them to China, the indictment said.
It said the two men and a contractor to Super Micro tried to deceive inspectors who visited the Southeast Asian company to confirm the servers hadn't been diverted to China. The inspectors included people from Super Micro's own compliance team and a U.S. Department of Commerce official who visited in December 2025, it said.
The group used hair dryers to remove and affix labels so that dummy servers -- nonfunctional replicas of Super Micro devices -- looked like real products, the indictment said, attaching a photo from a surveillance camera showing a woman with a hair dryer in her hand.
The Southeast Asian company bought around $2.5 billion in servers between 2024 and 2025, a substantial part of which were transshipped to China, according to the indictment. Between late April and mid-May last year, more than $510 million worth of Super Micro servers were sent to China via the Southeast Asian company, it said.
By late 2024, the accused had already arranged orders and transshipments of Blackwell chips, Nvidia's most-advanced model at the time, according to the indictment. The Journal reported in March 2025 that buyers in China had started receiving Blackwell servers from local resellers.
Authorities in the U.S., Singapore and elsewhere have stepped up enforcement since early last year and underground trading of Nvidia servers has become more difficult, especially for big orders, distributors and buyers have said.
"Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board," an Nvidia representative said. The company "does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective," the representative said.
Liaw, 71, of Fremont, Calif., and contractor Ting-Wei "Willy" Sun, a 44-year-old Taiwan citizen, were arrested Thursday and will be presented in the Northern District of California, the Justice Department said. Chang, 53, a Taiwan citizen, remains a fugitive, the department said. The three defendants couldn't be reached for comment.
Write to Raffaele Huang at raffaele.huang@wsj.com and Katherine Hamilton at katherine.hamilton@wsj.com
(END) Dow Jones Newswires
March 20, 2026 05:57 ET (09:57 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
