Taiwan raids Super Micro in widening China chip smuggling probe

[TAIPEI] Taiwan government agencies raided the offices of Super Micro Computer and several of its local affiliates, deepening an investigation into the alleged smuggling of Nvidia chips into China using the company’s servers.

Local investigators raided the residences of six people and the sites of three affiliated companies on Monday (Jun 29) as part of an ongoing probe into the allegedly illegal export of Super Micro’s servers, Taiwan’s Keelung District Prosecutors Office said in a statement. While the agency did not provide the names of those searched, Super Micro’s Taiwan office was among them, a person familiar with the situation said, asking not to be identified because the information is not public.

Shares of Super Micro, which said it’s cooperating with authorities, fell 8 per cent in US trading. The raids mark an expansion of Taiwan’s first public crackdown on AI chip diversion after years of pressure from Washington to take a more active role in curtailing China’s access to technology.

The US has for years restricted exports of advanced components such as Nvidia AI chips to China over concerns that the hardware – the vast majority of which is produced in Taiwan – could benefit Beijing’s military efforts.

Super Micro said in a statement it’s working closely with Taiwanese authorities. “Super Micro is committed to protecting our advanced technologies and intellectual property,” the firm said. “Super Micro products continued to be targeted in these matters, and we continue to cooperate with law enforcement and government officials in Taiwan and other jurisdictions in which we operate to ensure our technology is distributed as lawfully intended.”

Prosecutors also raided the offices of data centre operator Chief Telecom and Super Micro distributor Albatron Technology as part of the probe. Albatron said in an exchange filing that it was searched by local investigators earlier on Monday, without providing details about why it was targeted. Its shares plunged 10 per cent in Taipei, though the company said there was no financial or operational impact.

On Tuesday, Chief Telecom also said it was working with prosecutors on the case, adding that operations remained normal. Its stock slid more than 2 per cent.

Taiwan doesn’t currently treat AI chip exports to China as a crime. While local authorities warn potential sellers that they may be breaking US rules should they proceed, the only legal recourse through the island’s courts is to charge suspected smugglers with violations of other, existing local laws. Taipei is now considering criminalising exports themselves, which would give local prosecutors more tools to go after the illicit trade.

Authorities made their first known detentions of alleged chip smugglers in May, on charges of falsifying documents related to exports of Super Micro servers containing highly priced Nvidia AI chips. The three individuals were suspected of successfully sending at least one batch of Nvidia’s AI chips to China via Japan, Bloomberg News has reported, and attempting to export around 50 servers that Taiwan authorities seized before they left the island.

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“Super Micro’s Taiwan offices were raided by local authorities, according to Bloomberg News, reflecting persistent headline risk after its co-founder was indicted for allegedly smuggling Nvidia GPUs to China,” Bloomberg Intelligence analyst Woo Jin Ho said. “Although the company hasn’t been implicated, we expect news related to US GPU export controls to shadow the company’s favourable AI-server fundamentals, likely weighing on valuations until there’s a full resolution.”

The Keelung District Prosecutors Office said in its statement that it has also summoned the individuals searched on Monday for interviews.

Taiwan has this year taken a more aggressive stance about the leakage of technology from its world-leading chipmaking sector. The island is considering fortifying its export controls on AI chip sales to China to better align with the US, Bloomberg News has reported.

That would give Taiwan prosecutors more tools to crack down on illicit trade of AI hardware, which is manufactured in bulk on the island. Both Nvidia and Advanced Micro Devices rely on Taiwan Semiconductor Manufacturing to make their cutting-edge chips. BLOOMBERG