Federal agents Thursday arrested Yih-Shyan “Wally” Liaw, 71, co-founder of Super Micro Computer, one of Silicon Valley’s most prominent suppliers of AI server infrastructure. The San Jose-based company counts major cloud providers and AI labs among its customers.
A federal indictment unsealed in Manhattan describes an alleged $2.5 billion smuggling operation. Prosecutors say that between 2024 and 2025, Liaw and two co-conspirators illegally routed Supermicro servers packed with high-performance GPUs to China — chips that require an export license from the Commerce Department and are barred from sale to China without one. The restrictions exist to prevent advanced AI hardware from being used for military purposes.
How the scheme allegedly worked
According to the DOJ, servers were assembled in the U.S., shipped to Supermicro facilities in Taiwan, then handed off to a middleman company in Southeast Asia. The middleman filed paperwork suggesting the servers were for internal use. A logistics firm stripped all Supermicro branding, repacked the hardware in unmarked boxes and sent them to end buyers in China.
Prosecutors say that in just three weeks — from late April to mid-May 2025 — roughly $510 million worth of servers moved through the pipeline. That’s one-fifth of the scheme’s alleged total.
To survive audits, the defendants allegedly built physical decoys — dummy servers designed to look like the real thing. By the time inspectors arrived, the actual hardware was already in China. Surveillance footage, prosecutors say, captured one defendant using a heat gun to peel serial number stickers off genuine boxes and apply them to the fakes. Those same dummies were later presented to Commerce Department auditors. Defendants communicated through encrypted messaging apps, discussing shipment volumes, Chinese delivery addresses and ways to evade Supermicro’s own compliance team.
Three defendants
Liaw co-founded Supermicro alongside current CEO Charles Liang in 1993. He served as senior vice president of business development and sat on the board of directors. According to FactSet, his stake in the company is valued at $464 million. He is in federal custody.
Ruei-Tsang “Steven” Chang, Supermicro’s general manager in Taiwan, is a fugitive.
Ting-Wei “Willy” Sun, a company contractor, was arrested the same day.
Supermicro suspended both employees and terminated its contract with Sun. The company itself has not been charged.
A company with a complicated history
This is not Supermicro’s first major scandal. In 2018, Nasdaq halted trading in the company’s shares over accounting violations. The SEC launched an investigation; Supermicro paid a $17.5 million settlement. Liaw stepped down from all his positions — then returned in 2021.
In 2024, short-seller Hindenburg Research published a scathing report alleging the accounting problems had resurfaced. Auditor Ernst & Young soon refused to continue its engagement, saying it could no longer rely on management’s representations. Supermicro scrambled to hire a replacement — BDO — to avoid being delisted from Nasdaq.
Now comes the criminal arrest of its co-founder.
Nvidia and the market
The DOJ does not name the chip manufacturer in the indictment. But Supermicro CEO Charles Liang has repeatedly and publicly touted the company’s close relationship with Nvidia and its CEO Jensen Huang. An Nvidia spokesperson said the company does not provide service support for illegally diverted systems.
Shares of Supermicro (NASDAQ: SMCI) fell 12% in after-hours trading following the indictment’s release.
Why it matters
Since 2022, the U.S. has steadily tightened restrictions on advanced chip exports to China, citing national security concerns over their potential military applications. Circumventing those controls through shell companies and transshipment hubs has quietly become an industry of its own. The criminal arrest of a co-founder of a publicly traded Silicon Valley company sends a clear message: Washington has moved from warnings to prosecutions.
Supermicro said it is cooperating with the investigation. Liaw has not commented on the charges. Charles Liang is not named in the indictment.
All defendants are presumed innocent until proven guilty.