Former Supermicro contractor pleads guilty in $510 million China server diversion case
Key Facts
Ting-Wei "Willy" Sun, a former Supermicro contractor, pleaded guilty on Thursday in federal court in Manhattan, Reuters reported, citing court records. The U.S. Justice Department says the case involves the diversion to China of at least approximately $510 million worth of servers between late April and mid-May 2025. The plea covered conspiracy to violate U.S. export controls, smuggle goods from the United States, defraud the United States and obstruct justice, according to Reuters. The department said the defendants and the U.S. manufacturer had not obtained a license to export or re-export the servers to China. An FBI counterintelligence official linked the case to national security, saying that "controlling exports of sensitive U.S. artificial intelligence technology is essential to protecting our national security and defending the homeland."
According to the Justice Department, the intermediary company purchased about $2.5 billion in servers during 2024 and 2025. That figure covers the intermediary's server purchases during that period, while prosecutors separately identified the value of shipments diverted to China during the short period cited above. The department said the shipping route began with the servers being transported to the U.S. manufacturer's facilities in Taiwan. From there, the servers were delivered to the intermediary company elsewhere in Southeast Asia, according to the account in the indictment. Prosecutors added that the servers were repackaged and placed in unmarked crates to conceal their contents during the alleged diversion.
The methods used to conceal the diversion included substituting non-functional physical replicas of servers for the actual equipment, according to prosecutors. The Justice Department said these dummy servers were used to deceive the compliance team during inspections. It accused Sun and an intermediary of using a hair dryer to remove and reattach labels and serial-number stickers while preparing the replicas. It added that participants coordinated their movements using encrypted messaging apps as part of the scheme described in the indictment. In proceedings separate from Sun's plea, co-founder Wally Liaw previously pleaded not guilty to the charges, according to Data Center Dynamics.
Supermicro said in its statement that it "was not named as a defendant in the indictment," specifying the company's status in the criminal case. It said an investigation led by its independent directors found no evidence that any current member of senior management knew of the alleged diversion scheme. It added that the board had fully adopted the internal investigation's recommendations to strengthen its export compliance program. Separately, Reuters reported that shareholders filed a proposed class action in federal court in San Francisco over the case. The plaintiffs accused the company of overstating its business prospects and concealing weaknesses in its export-control compliance, allegations set out in their lawsuit.
In the market, Supermicro shares previously fell 33% on March 20 following the announcement of the criminal charges, according to Reuters. EL7 data showed SMCI shares closed at $41.86 on October 9, 2026. They then closed at $39.98 on Monday, October 12, ahead of the Tuesday trading session covered by Benzinga's report. Benzinga linked pressure on the shares in Tuesday's premarket trading to the lingering impact of the export case covered the previous week. It added that a broader decline in semiconductor and AI-related stocks increased pressure on the shares.
The legal developments come after Supermicro reported preliminary, unaudited net sales of $11.1 billion for the fourth quarter of its fiscal year 2026. The company compared those sales with $10.2 billion in the third quarter of the same fiscal year. Fourth-quarter sales in fiscal year 2025 were about $5.8 billion, according to the earnings statement. Alongside its announcement that the internal investigation had concluded, the company said it continued to cooperate with the relevant government agencies in their ongoing investigations. Sun's next court milestone is sentencing, scheduled for September 8, 2027, according to Data Center Dynamics.