The U.S. Justice Department has charged three individuals associated with artificial intelligence server manufacturer Super Micro Computer, including its co-founder, with conspiring to smuggle at least $2.5 billion worth of restricted U.S. technology to China. An indictment unsealed in a Manhattan federal court on Thursday details a complex evasion operation designed to bypass strict export controls implemented by the federal government in 2022.
Yih-Shyan Liaw, 71, a company co-founder and board member, was arrested in California on Thursday alongside 44-year-old contractor Ting-Wei Sun. A third suspect, Taiwan-based sales manager Ruei-Tsang Chang, currently remains a fugitive. Following the announcement of the charges, Super Micro’s stock plunged between 8 percent and 12 percent in after-hours trading as the company moved to sever ties with the accused individuals.
The Transshipment Network
Federal officials allege the three men utilized a sophisticated routing network to conceal their true clientele from both U.S. export control authorities and the primary manufacturers of the servers. According to the indictment, the operation routed U.S.-made hardware through Taiwan to various countries in Southeast Asia.
Once in Southeast Asia, the smugglers allegedly employed hair dryers to meticulously peel serial numbers and identifying labels off the genuine machines. These labels were then placed on dummy servers left behind to pass audit inventories, while the actual high-performance AI servers—foundational hardware for parallel and distributed computing clusters used to train massive AI models—were repacked into unmarked boxes and shipped into China.
James Barnacle, FBI Assistant Director in Charge, stated in a release that the defendants relied on fabricated documents and a pass-through company to execute the scheme. Jay Clayton, U.S. Attorney for the Southern District of New York, stated that such operations pose a direct threat to U.S. national security.
Corporate Fallout And Legal Proceedings
Super Micro Computer was not formally named as a defendant in the federal complaint. The San Jose-based manufacturer confirmed it was informed of the indictment by federal prosecutors on Thursday and is cooperating with investigators. The company immediately placed Liaw and Chang on administrative leave and terminated its relationship with Sun.
Liaw was released on bail following his arrest in California on Thursday. Sun, a citizen of Taiwan, remains in custody and is scheduled for a bail hearing on Friday.
Yes, it's real. The US DOJ unsealed an indictment yesterday charging Super Micro Computer co-founder Yih-Shyan “Wally” Liaw and two associates with conspiring to smuggle ~$2.5B in AI servers containing restricted Nvidia chips to China (2024-2025), violating export controls via…
— Grok (@grok) March 20, 2026
The disruption in the technology hardware sector drew immediate reactions from industry partners. Nvidia, the dominant producer of the highly sought-after AI chips housed within Super Micro’s servers, issued a statement following the indictment.
“We continue to work closely with our customers and the government on compliance programmes as export regulations have expanded,” an Nvidia spokesperson said. “Unlawful diversion of controlled US computers to China is a losing proposition across the board – Nvidia does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective.”
Geopolitical Stakes
The United States initially implemented sweeping export controls in October 2022 to restrict China’s access to advanced computing and semiconductor manufacturing equipment. The regulations were explicitly designed to choke off the supply of cutting-edge hardware necessary to develop frontier AI models, citing concerns that Beijing could utilize advanced artificial intelligence to accelerate military modernization and expand domestic surveillance capabilities.
Since the initial ban, a cat-and-mouse dynamic has emerged, with international fixers repeatedly attempting to circumvent embargoes to feed China’s massive demand for restricted components. The arrest of a founding executive and board member of a major U.S. tech hardware manufacturer marks a severe escalation in the Justice Department’s willingness to enforce technology export laws at the highest corporate levels.