Super Micro Computer Inc., a Silicon Valley-based server maker, has seen tremendous growth in recent years, riding the wave of enthusiasm around artificial intelligence (AI). Valued at approximately $35 billion, the company has become a significant player in the high-performance computing market. However, according to latest report by Hindenburg Research behind the success lies a complex web of questionable practices, particularly in the realm of international sanctions and export controls.
A recent three-month investigation has uncovered troubling evidence of sanctions evasion and export control failures. This investigation, which involved interviews with former senior employees and industry experts, as well as a review of litigation records, international corporate documents, and customs data, reveals how the company has been skirting U.S. sanctions while continuing to expand its global footprint.
Sanctions Violations and Export Control Failures
Super Micro’s troubling history with sanctions is not new. In 2006, the company pleaded guilty to a felony count of exporting banned components to Iran, a violation of U.S. export controls. The company’s CEO, Charles Liang, acknowledged the mistake and claimed that the company had learned from it. However, the investigation suggests otherwise.
When Russia invaded Ukraine in February 2022, the U.S. government imposed stringent restrictions on the export of high-performance computers and components to Russia. Company publicly disclosed that some of its products were subject to these bans and claimed that it had halted all sales to Russia, emphasizing that no revenue had been recorded from Russia since the day before the invasion.
However, trade data tells a different story. According to the investigation, exports of Super Micro’s high-tech components to Russia have tripled since the invasion, seemingly in direct violation of U.S. export bans. The review of over 45,000 import/export transactions shows that at least 46 companies handling Super Micro products in Russia are now under sanctions or on U.S. government watchlists.
Nearly two-thirds of exports to Russia since the invasion involve “high priority” components that the Russian military may be diverting to the battlefield, according to U.S. government warnings. One of the largest importers of its products in Russia is Niagara Computers, a supplier to one of Russia’s largest supercomputers at a once-secret, now-sanctioned research center. Niagara Computers has reportedly received at least $46.3 million worth of products since the start of the war.
Initially, these sales were made through a distributor in California. However, as scrutiny increased, the sales were routed through three newly formed Turkish shell companies, one of which was later sanctioned for smuggling restricted items to Russia. Additionally, almost $30 million worth of components have been shipped to Russia’s largest importer of dual-use civilian-military chips via a newly created Hong Kong shell entity. This Russian importer is also now under U.S. sanctions.
The Role of Related Parties in Sanctions Evasion
Super Micro’s complex network of related parties has played a significant role in facilitating sanctions evasion. The investigation found that the company’s disclosed and undisclosed related parties have been involved in a series of questionable transactions that raise concerns about compliance with U.S. export controls.
For example, disclosed related party suppliers Ablecom and Compuware, controlled by CEO Charles Liang’s brothers, have been paid nearly $1 billion in the last three years. These companies appear to operate in a circular relationship with Super Micro, providing components to Super Micro, assembling them, and then selling them back to the company. They also rent warehousing and factory space, despite the company having its own manufacturing facilities.
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The investigation also uncovered evidence of undisclosed related parties. The youngest brother of CEO owns two Taiwan-based entities that make server components, which media reports and former employees indicate are Super Micro suppliers. Both entities operate out of the Super Micro Science and Technology Park in Taiwan, yet company has not disclosed any related party transactions with them.
Another brother of the CEO operates a disclosed related party but is also the director and shareholder of undisclosed Hong Kong and Taiwanese entities that appear to resell Super Micro products and provide “professional OEM services.” These entities operate out of the same building as Compuware, one of the disclosed related parties.
The investigation revealed that some of these related parties have been instrumental in exporting Super Micro products to countries subject to U.S. sanctions. For example, the Turkish shell companies mentioned earlier were linked to one of the CEO’s brothers. These entities served as intermediaries for exporting Super Micro components to Russia, helping the company evade U.S. export bans while maintaining a façade of compliance.
China Connection: A Joint Venture with Controversy
Super Micro’s questionable dealings extend beyond Russia to include a joint venture with a Chinese state-run company, Fiberhome. Fiberhome is involved in high-tech surveillance and repression of ethnic communities in western China, actions that have drawn severe criticism from human rights organizations and led to U.S. government sanctions.
Since 2020, when Fiberhome was watchlisted by the U.S. government, Super Micro has sold approximately $196 million worth of sophisticated computer components to the joint venture. Super Micro has defended these sales by arguing that the joint venture entity itself was not watchlisted, even though its partner was. This legalistic defense has raised concerns among industry observers and human rights advocates, who argue that Super Micro is aiding a repressive regime by continuing its business with Fiberhome.
The Fallout: Eroding Trust and Competition
The investigation’s findings have serious implications for Super Micro’s reputation and its future in the high-performance computing industry. The company’s repeated violations of export controls and its ties to controversial entities have raised red flags among customers and partners.
Nvidia, a key partner and chip supplier to Super Micro, has publicly endorsed its competition. In May 2024, Nvidia CEO Jensen Huang stated, “Nobody is better at building end-to-end systems of very large scale for the enterprise than Dell,” signaling a shift in Nvidia’s alliances.
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CoreWeave, Super Micro’s largest customer over the past year, has also turned to Dell for its GPU servers, potentially worth over $1 billion. Tesla, another major customer, has reportedly reduced its reliance on Super Micro, with recent reports indicating that Elon Musk’s companies are now sourcing servers from Dell.
Super Micro’s challenges are compounded by the loss of other key customers. Amazon AWS, once a significant client, severed ties with Super Micro after experiencing delivery issues. Digital Ocean, a U.S. cloud service provider, also switched from Super Micro to Dell, citing reliability concerns.
Former employees and channel partners have highlighted Super Micro’s after-sales service as a significant weakness, further eroding the company’s ability to retain customers. One former salesperson described it as “their Achilles heel,” noting that poor service has driven customers to seek alternatives.
Super Micro’s actions have not only violated U.S. export controls but also undermined the trust of its customers and partners. With competition from more credible and reliable companies like Dell and HPE, Super Micro faces an uncertain future. Its reputation as a serial recidivist, coupled with ongoing legal and regulatory scrutiny, suggests that the company’s challenges are far from over.
