A prosecutor in Taiwan said on Tuesday that officials raided the offices of US company Super Micro Computer and two other tech firms as part of an expanded probe into the alleged smuggling of Nvidia AI chips to China.
Prosecutors said in May they were investigating the shipment of “high-end” AI servers containing advanced Nvidia chips to China, Macau and Hong Kong, in violation of US export controls. They also revealed the key reason why this is a problem on Taiwan.
Nine people are now being investigated, Huang Sheng, head of the Keelung Prosecutors’ Office, told AFP. That is a rise of six people from the three individuals who were originally under suspicion.
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They are accused of forging documents so they could ship roughly 50 servers made by Super Micro Computer to China.
Some of the servers were cleared by Taiwan customs and sent to China via Japan, an official previously told AFP on the condition of anonymity.
Some 12 were raided on Monday as part of the probe, the prosecutors’ office said in a statement. They included the homes of six people and offices of the companies they worked for – Nasdaq-listed Super Micro Computer and Taiwan-listed firms Albatron Technology and Chief Telecom.
The United States restricts the export of its most cutting-edge AI chips to China, partly over concerns that this advanced tech could be used by Beijing’s military.
This is a significant issue in Taiwan, but the tricky part of this probe is that it is not a criminal offence on the island to export servers with advanced chips to China – and that is a situation lawmakers and experts say needs to change.
So, Taiwanese prosecutors have to rely on other laws to go after offenders.
Lawmaker Chung Chia-pin, who belongs to President Lai Ching-te’s Democratic Progressive Party (DPP), plans to propose an amendment to the Foreign Trade Act to include a “mainland China semiconductor chip clause” that would make exporting chips there illegal.
Chung told AFP on Tuesday that a loophole in the law was created under former president Ma Ying-jeou, who belongs to the Kuomintang party, and successive DPP-led governments have failed to close it.
Company shares fall sharply
Top-end chips made by US titan Nvidia – the world’s most valuable company – are used to train and run AI systems.
In response to Washington’s export restrictions, China has been accelerating efforts to develop its own AI chips and break away from reliance on US hardware.
This month, Taiwanese Deputy Economic Affairs Minister Ho Chin-tsang said Taiwan and the United States “will work to implement our shared export control goals”, but the government has not provided details.
Chris McGuire, an expert on China and AI at the US-based Council on Foreign Relations, said chip smuggling was a “really significant problem” in Taiwan and Southeast Asia.
“It’s really, really important that allies align with the United States on all of these policies and also legal authorities,” McGuire, who worked at the National Security Council under former US president Joe Biden, told a forum in Taipei this month.
“It’s not a criminal violation in Taiwan to export AI chips to China – obviously it is under US law, but it’s not under Taiwanese law. That needs to change, right?”
Super Micro Computer, Albatron Technology and Chief Telecom have said separately they are cooperating with investigators. Their shares have seen sharp falls this week.
Prosecutors say it is too early to know if the case is linked to a Nvidia chip smuggling case involving Super Micro Computer employees in the United States.
A US indictment unsealed in March showed employees of the company allegedly raked in billions of dollars diverting Nvidia AI chips to China in breach of export controls.
Japan ready to act on low yen
Meanwhile, Japan’s finance minister said on Tuesday that authorities were ready to take “appropriate action” after the yen hit a 40-year low against the dollar.
The currency has been sliding for years and has come under renewed pressure because of the Middle East war and the gap in US and Japanese interest rates.
Satsuki Katayama said Japan “will take appropriate action at any time as necessary”, local media reported.
The comment was intended to signal to markets that Japan was prepared to intervene to support the currency after spending more than $70 billion doing so last month.
The yen sank past 161.96 per dollar in London trade on Monday for the first time since 1986. And on Tuesday, it hit 162.40 in Asian trade before recovering to 162.17.
A weak yen makes imports more expensive for resource-poor Japan, notably for dollar-traded oil. Prime Minister Sanae Takaichi’s government has been shielding consumers with heavy fuel and energy subsidies.
But the weak yen has also helped fuel a boom in tourism, since it makes shopping, accommodation and food cheaper for foreign tourists.
The Bank of Japan this month raised interest rates to a 31-year high but there are expectations that the US Federal Reserve could lift borrowing costs itself this year, meaning that the gap will remain.
Further hikes by the BoJ could also meet resistance from Takaichi’s government, which is anxious not to snuff out growth with high borrowing costs.
Japan’s currency authorities did not intervene in the exchange market between May 28 and June 26, finance ministry data showed late on Tuesday.
Asian stocks mixed
In other Asian business news, tech firms bounced back in Asia on Tuesday, tracking a rebound in their counterparts on Wall Street following the hefty selling of the past two weeks.
With optimism that the US-Iran crisis will eventually come to an end and the Strait of Hormuz reopen, attention has returned to central bank monetary policy and the future of the AI boom.
The tech sector – which has led a global rally across markets and pushed several companies to record highs – has taken a pummelling of late on fears over stretched valuations, interest rates and when traders will see returns on their investments.
But a rush to pick up bargains following that selloff fuelled a spike in New York, where the Dow hit a fresh peak and the Nasdaq climbed more than 2%. That came thanks to strong finishes for ‘Magnificent Seven’ plays, including Amazon, Meta and Nvidia.
“After last week’s record selling in big tech, buyers returned to the same names they were throwing overboard only days earlier,” SPI Asset Management’s Stephen Innes told AFP.
“That does not mean the AI trade has suddenly been cured. It means the patient stopped bleeding long enough for the surgeons to begin bidding the stock back up. For Asia, and especially Korea and Japan, that is the handoff.”
After a shaky start, Asian investors pushed tech companies higher, with Seoul’s Kospi – the best-performing benchmark this year – rising 1% but still well down from its recent record high touched before last week’s rout.
Tokyo and Taipei were also sharply higher, while Shanghai, Wellington and Bangkok enjoyed buying interest.
Tech firms edge up
Among the best-performing firms, South Korean chip giant Samsung and Japan’s Tokyo Electron added more than 3%, while TSMC advanced more than 1% in Taipei.
However, Hong Kong, Sydney, Singapore, Manila, Mumbai and Jakarta fell.
Later, London, Paris and Frankfurt all advanced.
Traders were keeping an eye on Tokyo amid speculation the government could intervene in currency markets after the yen hit its weakest level against the dollar since 1986. That is partly due to expectations the Federal Reserve will lift interest rates this year.
The moves come ahead of US jobs data on Thursday, with analysts warning a stronger-than-expected reading could fan bets on a US hike sooner rather than later.
An increase in borrowing costs to a 31-year high by the Bank of Japan this month did little to support the yen, with government officials’ warnings of an intervention also falling short.
“A major catalyst behind the dollar’s move has been the arrival of new Federal Reserve Chair Kevin Warsh, whose public comments have been interpreted as notably more hawkish” than US President Donald Trump might have wished, IG’s Axel Rudolph said.
“The prospect of higher US interest rates has widened the expected policy gap between the United States and many of its major trading partners, increasing demand for dollar-denominated assets.”
Oil prices edged down on easing concerns over Middle East peace talks after the United States and Iran exchanged fire at the weekend.
Key figures around 0810 GMT
Tokyo – Nikkei 225: UP 0.9% at 70,062.32 (close).
Hong Kong – Hang Seng Index: DOWN 0.6% at 22,881.02 (close).
Shanghai – Composite: UP 0.5% at 4,094.40 (close).
London – FTSE 100: UP 0.4% at 10,523.33.
Dollar/yen: UP at 162.23 yen from 161.92 yen on Monday.
West Texas Intermediate: DOWN 0.6% at $70.32 a barrel.
Brent North Sea Crude: DOWN 0.9% at $72.53 a barrel.
New York – Dow: UP 0.6% at 52,182.74 (close).
- Agence France-Presse with additional editing and input by Jim Pollard
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