The co-founder of Super Micro has been accused of smuggling servers to China.

      The indictment of Super Micro’s co-founder reveals not only a $2.5 billion scheme but also a system that was never designed to prevent such activities.

      In a rented warehouse in Southeast Asia, an individual was using a hair dryer on a server box—not to dry it, but to detach a serial-number sticker for transfer to a different machine, one that had never been powered on, never booted, and was not intended for its declared destination.

      The actual servers containing Nvidia’s advanced AI accelerator chips had already been repackaged into plain boxes and shipped to China. The decoy, bearing borrowed labels, was prepared for inspection.

      This scene, reconstructed from surveillance footage referenced in a federal indictment unsealed on March 19, 2026, provides the clearest illustration of how America's semiconductor export controls function in reality—not in theory. The explanation involves a hair dryer.

      The indictment charges three individuals: Yih-Shyan ‘Wally’ Liaw, 71, co-founder and Senior Vice President of Business Development at Super Micro Computer; Ruei-Tsang ‘Steven’ Chang, 53, general manager of the Taiwan office; and Ting-Wei ‘Willy’ Sun, 44, described by prosecutors as a ‘fixer.’

      Together, they are accused of orchestrating the diversion of approximately $2.5 billion worth of servers—many assembled in the U.S. and incorporating Nvidia GPUs— to clients in China, using a front company in Southeast Asia, between 2024 and 2025.

      During a six-week period in the spring of 2025, at least $510 million worth of hardware was shipped. Liaw and Sun have been arrested, while Chang, a Taiwanese citizen, remains at large.

      The charges include conspiracy to violate the Export Controls Reform Act, conspiracy to smuggle goods from the U.S., and conspiracy to defraud the government, with potential combined prison sentences of up to 30 years.

      Super Micro, the publicly traded San Jose firm that produces the hardware central to the scheme, has not been named as a defendant. It placed Liaw and Chang on administrative leave and severed ties with Sun, stating it has been cooperating with investigators and maintaining a ‘robust compliance program.’

      This phrase deserves some reflection.

      As per the indictment, the defendants and their co-conspirators used encrypted messaging applications to coordinate quantities of servers to order, shipping locations in China, and crucially, how to conceal the scheme from the company’s own compliance team.

      When an internal audit was planned, they set up thousands of non-functional server replicas in a warehouse rented by the front company. When a U.S. Department of Commerce inspector arrived to examine the facility, they employed the same props, utilizing heat guns to swap labels and serial numbers before the visit.

      The inspector, as noted in the indictment, did not see the authentic servers since they had already been dispatched to China. An auditor who should have been onsite for a separate inspection was, according to prosecutors, ‘offsite, entertaining himself at the front company’s expense.’

      The loophole that was never a secret

      The transshipment route through Southeast Asia is not a new finding. It is a well-known, documented, and repeatedly flagged aspect of the export control framework—one that U.S. trade analysts, think tanks, and the Department of Commerce itself have been warning about for years. Countries such as Malaysia, Singapore, Vietnam, and Thailand have historically lacked the enforcement infrastructure or political will to monitor re-exports rigorously, as noted by analysts at the East Asia Forum earlier this month.

      Between April and July 2025, Vietnamese authorities intercepted over 2,000 shipments incorrectly labeled ‘Made in Vietnam’ but traced back to Chinese factories, according to an analysis by The Diplomat. Malaysian tech hubs in Penang and Johor were highlighted for similar rerouting practices.

      DeepSeek, the Chinese AI lab that gained prominence after releasing its January 2025 model, was reported by Tom’s Hardware to have established ‘ghost’ data centers in Southeast Asia to pass audits, subsequently forwarding the GPUs onward.

      An investigation by the Financial Times estimated that China secured approximately $1 billion in advanced AI processors in the three months immediately following the last significant tightening of U.S. export controls.

      Thus, the pattern is not an anomaly; it is systemic. The controls are enforced mainly at the point of sale and the first shipment, relying almost entirely on the buyer’s declared end use and the downstream compliance of every intermediary. When the incentive to deceive amounts to hundreds of millions of dollars, the honor system has its limitations.

      The company that keeps surviving itself

      Super Micro’s involvement in this case is, to put it mildly, not surprising. The company has amassed a regulatory history that would be notable even in isolation, but suggests something more systemic when viewed over time.

      In 2018, it was temporarily