Taiwan Accuses Nvidia Manager of Smuggling AI Servers into China

Prosecutors in the Taiwanese city of Keelung have brought charges against nine defendants, among them, according to Reuters, a senior Nvidia manager and two Supermicro employees working on the island. They are accused of breach of trust and of forging documents that made it possible to disguise the illegal export of advanced AI servers to China in violation of US export controls. One more suspect in a related case is on the run — he is accused of siphoning funds out of a distributor company involved in the shipments.

Since 2022, the US has required a license to export semiconductors to China, seeking to maintain its lead in the AI race. The Taiwanese investigation began after the March arrest in the US of Supermicro co-founder Wally Liaw, who is accused of funneling $2.5 billion worth of servers into China since 2024.

Servers “in use” — on paper

Investigators established that those behind the scheme tried to make it appear on paper that 130 B300 servers were installed and in use at a facility in Taiwan. In reality, 74 of them had gone to Chinese customers, while the remaining 56 were detained when Taiwanese customs noticed the discrepancies. According to prosecutors, all of the accused were fully aware of both companies’ “strict internal control procedures” — and nevertheless acted ever more brazenly in pursuit of what the authorities called “enormous profits,” damaging the country’s international image.

Supermicro stresses that it is not itself a target of the investigation, that it is cooperating with the inquiry, and that it has already fired several employees whom an internal review linked to the scheme. A third-party audit cleared the current top management of suspicion, but the company has been faulted for failing to notice that billions of dollars’ worth of equipment was being shipped to dubious clients. Concerned investors have already filed a securities fraud lawsuit.

Back in May, before Nvidia employees were directly tied to the case, company head Jensen Huang sharply criticized Supermicro for its failed compliance system and demanded that the problem be “fixed.” “We insist that our partners follow the rules,” he said at the time.

The remote-access loophole

Expert Lauren Barden-Hare, writing in a column for The Hill, notes that at the center of the operation was an unnamed firm from Southeast Asia that coordinated the actions of accomplices at both corporations. In her words, the scheme repeats an old tactic: China exploits business ties with figures whose capital is invested in the country but who are formally located outside it.

Meanwhile, the US is debating the Remote Access Security Act, a bill that would extend export controls to cloud-based remote access to chips through data centers in Southeast Asia. It is precisely this access, in the view of industry experts, that fuels the progress of Chinese models from Alibaba, ByteDance and Tencent. Cloud providers are sure to push back — the cost of the new compliance would fall on them.

An interesting detail to close on: Nvidia recently announced a 15% increase in the prices of its AI servers. So anyone looking to make a little money on illegal shipments has apparently been put on notice that they are now being watched more closely.

Source: Ars Technica