Suitcases traveling through airports in Southeast Asia, front companies in Bangkok receiving server shipments, and somewhere downstream, Alibaba data centers silently humming with chips they were never supposed to have all have an almost cinematic quality. Depending on your point of view, the U.S. government’s attempt to impede China’s AI development through export restrictions has either produced a manageable deterrent or an incredibly profitable black market. Most likely both.
Many in the semiconductor industry were startled when federal prosecutors unsealed an indictment in March. Yih-Shyan “Wally” Liaw, a co-founder of Supermicro, and two other people were accused of plotting to transfer about $2.5 billion worth of Nvidia-equipped servers to China via a network of Southeast Asian-based shell corporations. OBON Corp, an AI company based in Bangkok, was the purported conduit. After receiving the hardware, it was observed to move eastward. Investigators claim that between April and May of 2025 alone, more than $500 million worth of equipment was traded. Supermicro has declared it is not named as a defendant and is cooperating, while Liaw has entered a not guilty plea.
The dollar amount is not the only thing that makes the case compelling. It’s the routine effectiveness of the process. In order to move restricted H200 chips with what seems to have been extraordinary consistency, smugglers reportedly set up dummy servers, filed false shipping declarations, and used third-party brokers who were familiar with the local trade routes. With its aggressive pursuit of AI investment from Microsoft, Google, and ByteDance, Thailand provided an advantageous geographic location—a respectable-looking middleman between Chinese end users and American suppliers.
When Nvidia CEO Jensen Huang arrived in Taipei a few weeks later, he spoke to reporters at Songshan Airport using the kind of circumspect language used by business executives when something uncomfortable follows them onto the tarmac. Supermicro should strengthen its compliance controls, he advised. According to him, Nvidia demands that its partners abide by US trade regulations. All of that is unsurprising, but it doesn’t fully address the more difficult question: how does $2.5 billion worth of hardware move without setting off early alarms? The compliance architecture might not have been designed to detect what it was purportedly monitoring.
Following the U.S. indictment, Taiwan moved swiftly, with the Keelung District Prosecutors’ Office announcing its own crackdown that included servers headed for China, Hong Kong, and Macau, three suspects, and false shipping declarations. Although the Taiwan case and the U.S. prosecution are technically distinct, there is enough overlap in the geography and tactics to make them difficult to interpret as coincidental. Observing the accumulation of these cases gives the impression that the enforcement community is only now starting to comprehend the scope of what has been occurring.
Chinese businesses have taken an active role in all of this. These networks are driven by genuine, non-subtle demand. Companies like Alibaba, which denied knowing about the Supermicro situation and claimed it has never used banned chips, are operating in an environment where there is tremendous pressure to remain competitive globally, and domestic chip production hasn’t even come close to filling the gap left by U.S. restrictions. Someone obviously wanted those chips badly enough to pay black market prices and take on the legal risk of moving them, regardless of whether Alibaba’s denial is valid.
The number of similar operations that have gone unnoticed is still unknown. Export control enforcement necessitates a level of coordination across borders, agencies, and private logistics chains that has historically been challenging to maintain due to the extensive and well-established trading networks in the Asia-Pacific region. Since then, the H200 has been partially approved for sale to China, albeit with a 25% tariff that modifies the economics. However, the infrastructure needed to smuggle these chips is already in place, operational, and has transported billions of dollars. The rules change a little, but that doesn’t make it go away.
Export controls, despite their good intentions, are not a closed system, as this entire episode demonstrates. They create incentives just as much as they create barriers, and those incentives have been carefully exploited somewhere between the data center of a Chinese hyperscaler and an office park in Bangkok.
