Taiwan raids Supermicro and partners in Nvidia chip smuggling probe

At a glance:

• Taiwan raids Supermicro and two supply-chain partners in widening Nvidia smuggling probe
• Nine sites hit including Supermicro office, six homes, and three affiliated companies
• US and Taiwan separately prosecuting the scheme involving $2.5 billion in diverted chips

Taiwan's Keelung District Prosecutors' Office raided Supermicro Computer's Taiwan office on Monday, along with the homes of six individuals and three affiliated company sites, expanding the island's first criminal investigation into the diversion of Nvidia AI chips to China. The coordinated action targeted Supermicro's Taiwan operations and the residences of six people who were subsequently summoned for questioning. Supermicro's shares fell 8% in U.S. trading following the news, highlighting the market's sensitivity to the ongoing legal turmoil.

The company responded with a statement indicating it is cooperating with authorities and remains "committed to protecting our advanced technologies and intellectual property." This raid represents an escalation from previous actions, marking the first time that distribution itself has been targeted rather than just executives accused of orchestrating the smuggling scheme. Earlier investigations focused on individuals, while Monday's operations expanded scrutiny to include downstream partners in the supply chain.

Investigators simultaneously searched Supermicro distributor Albatron Technology and data center operator Chief Telecom, according to a person familiar with the matter. Albatron confirmed in an exchange filing that it had been searched, reporting no financial or operational impact, though its shares fell 10% in Taipei trading. Chief Telecom stated its operations remained normal, with its stock sliding more than 2%. Neither Albatron nor Chief Telecom has yet been charged, suggesting the investigation is still in its early stages.

Taiwanese law currently does not classify the unauthorized export of AI chips to China as a crime, forcing prosecutors to rely on liberal interpretations of existing statutes. Previous raids led to charges against three suspects for falsifying shipping documents rather than breaching export restrictions, after authorities seized approximately 50 Supermicro servers bound for China, Hong Kong, and Macau. Monday's summonses follow the same pattern, with six individuals questioned over document offenses rather than the actual exports themselves.

This legal gap has prompted Taipei to consider new legislation that would restrict AI chip sales to all customers in China, not just blacklisted firms like Huawei and SMIC. Such a change would enable prosecutors to charge smuggling as an export crime for the first time. The proposed measure is currently under discussion in trade talks with the United States and has not yet been finalized, meaning all current Taiwanese official actions must continue resting on forgery and fraud charges.

Meanwhile, the United States is pursuing parallel prosecution under export-control law. A federal indictment charges Supermicro co-founder Yih-Shyan "Wally" Liaw with conspiring to divert roughly $2.5 billion in Nvidia-equipped servers to China through a Southeast Asian front company. According to the indictment, Liaw used dummy servers and serial-number labels lifted with heat to deceive auditors. Liaw pleaded not guilty, was released on a $5 million bond, and faces trial on November 2nd, with potential penalties of up to 20 years imprisonment if convicted.

The situation highlights an ironic contradiction: the jurisdiction that manufactures most of the world's advanced AI chips has weaker legal mechanisms to prevent their unlawful diversion compared to the United States. The GPUs at the core of both cases are fabricated by TSMC in Taiwan before assembly into Supermicro servers, yet so far only the U.S. has established specific criminal offenses for smuggling such technology. This disparity underscores the urgent need for updated regulatory frameworks as AI hardware becomes increasingly strategic.

Going forward, the case could reshape how semiconductor companies manage supply chain oversight and export compliance. Supermicro had previously warned that risks emerge when its products pass through multiple downstream parties beyond direct control. As investigations continue across multiple jurisdictions, the technology industry is watching closely for precedents that could affect global AI hardware distribution and cross-border compliance requirements.