(Preview) A Giant Mess with Super Micro; Completely Correct Xiong’an Progress; The PRC’s Balancing Act on Iran; Manus, Apple and Router News

Summary

Sharp China with Bill Bishop

Episode Summary: (Preview) A Giant Mess with Super Micro; Completely Correct Xiong’an Progress; The PRC’s Balancing Act on Iran; Manus, Apple and Router News

Date: March 25, 2026
Hosts: Andrew Sharp and Bill Bishop

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Episode Overview

This episode centers on the recent US indictment involving Super Microcomputer for allegedly smuggling Nvidia’s advanced AI chips to China in violation of export controls. Andrew Sharp and Bill Bishop unpack the details and broader implications for US chip policy, corporate compliance, and the effectiveness of export controls. The conversation also briefly addresses the ongoing development of the Xiong'an New Area in China, examining its political significance.

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Key Discussion Points

1. The Super Micro Indictment and Smuggling Scheme

[00:25 – 07:21]

• News Recap:
  Andrew introduces the breaking news (from Sinocism’s newsletter): Federal prosecutors charged three individuals, including a Super Micro senior VP, for running a $2.5 billion scheme to divert AI servers with Nvidia GPUs to China, circumventing US export restrictions. The scheme involved repackaging servers via Taiwan and Southeast Asia, altering serial numbers using hair dryers, and falsifying documentation.
• High-Level Reaction:
  • Bill points out this wasn’t an isolated story, mentioning earlier Reuters reporting and legal pushback by Super Micro (with Clairlock law firm).

    “Obviously either Clairlock was not being honest or they were misinformed by their client.” (Bill Bishop, 02:05)

  • The prosecution highlighted the remarkable lengths these actors went, including detailed methods for evading audits.
• Surprising, Yet Expected:
  • Andrew notes the creativity involved:

    “You're talking about a $20 billion market cap company that's in a warehouse with hair dryers, you know, filing off serial numbers.” (Andrew Sharp, 04:50)

  • Both hosts agree the scale is astonishing but, based on previous leaks and articles, not unexpected for those following the industry.
• Scope of the Smuggling:
  • Bill says the $2.5B figure is likely only a portion of a much broader problem and references other suspected conduits like “Mega Speed”, a Singaporean entity.

    “There are probably more shoes to drop there.” (Bill Bishop, 03:48)

2. Nvidia’s Responsibility and Corporate Incentives

[04:21 – 07:54]

• Due Diligence & Accountability:
  • Andrew: Export controls should require companies (like Nvidia) to “really know your customer.”
  • Bill: Companies have “many, many, many incentives” to allow this to happen, noting:

    “Nvidia has no incentive to crack down on this because, one, it’s sales; and two, it keeps Chinese firms using Nvidia chips… keep them addicted to our tech stack.” (Bill Bishop, 05:56)

• Enforcement Gaps:
  • Both suggest that absent aggressive enforcement and real penalties, corporations have little incentive to self-police.
  • Example: TSMC only stepped up compliance after threat of fines.
  • Andrew:

    “There should probably just be more burden shifting to a company like Nvidia to actually police and monitor where its chips end up, because that seems like the only effective way to actually enforce export controls.” (Andrew Sharp, 06:26)

3. Congressional and Regulatory Response

[07:54 – 10:06]

• Bipartisan Concern:
  • Bill recounts congressional frustration, referencing a Financial Times story about Senators Banks and Warren demanding Commerce suspend Nvidia’s licenses and further restrict exports to Southeast Asia due to ongoing smuggling and license violations.
• Strategic Dilemma:
  • Both note a growing push in Congress to prioritize domestic AI chip needs, but warn of risks:

    “…Banning exports to more countries than just China in Asia seems like a slippery slope to go down and could potentially leave the door wide open for China to replace Nvidia and displace the AI software stack, the American AI software stack that the whole world is running on.” (Andrew Sharp, 12:21)

4. Policy Effectiveness and Enforcement

[10:06 – 15:50]

• Export Controls: Success or Failure?
  • Bill critiques lax enforcement:

    “…the enforcement mechanism at Commerce has been gutted. I think from a substantive perspective, the enforcement has been effectively gutted.” (Bill Bishop, 14:00)

  • Andrew points out that constraints on compute for China suggest controls have had partial success but inconsistent follow-through (“schizophrenic” enforcement).
• Corporate Denials:
  • Multiple instances of Nvidia and Super Micro executives denying any illegal smuggling—seen as “see no evil, hear no evil.”
  • Andrew:

    “I would find Jensen Huang so much more credible if he admitted that there was smuggling happening and committed to cracking down on it. But the see no evil, hear no evil approach from him, Sachs and others…” (Andrew Sharp, 15:17)

• Need for Real Penalties:
  • Bill: Unless presented with incontrovertible evidence and credible threat of penalties, “why crack down on it?”

5. Whistleblower Incentives and Final Thoughts

[15:50 – 16:29]

• Whistleblowing as a Mechanism:
  • Bill explains that whistleblower laws could result in significant payouts if someone inside Nvidia revealed wrongdoing.
  • Both hosts underscore that despite ongoing revelations, the full scope of chip diversion through various international intermediaries may not yet be known.
  • Bill:

    “There might be other shoes to drop.” (16:29)

6. Xiong’an New Area—Completely Correct?

[16:33 – 17:30]

• Transition:
  • The show pivots to Xi Jinping’s inspection of Xiong’an, labeled as a “completely correct” political move by official Chinese sources.
• Summary:
  • Bill introduces Xiong’an as a large-scale city-building project south of Beijing, initiated by Xi on swampland—a reflection of top-down, centralized vision in modern China.

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Notable Quotes with Timestamps

• On the corporate smuggling schemes:

  “There's a lot of innovation in how they smuggle.” (Bill Bishop, 04:47)

• On enforcement gaps:

  “Unless you have more of enforcement from, you know, the government, why would, what's the incentive to stop?” (Bill Bishop, 06:13)

• On enforcement’s political dimensions:

  “There is, I think, real bipartisanship on the Hill, you know, that is unhappy with President Trump's decision to grant these owner licenses. Especially when… that's capacity that's not going to U.S. firms.” (Bill Bishop, 08:54–09:04)

• On corporate denials:

  “So like that statement from Nvidia, it's, that's why it's… there are two possibilities. One, they're just incompetent… or two, they're just dissembling.” (Bill Bishop, 09:53)

• On the big picture:

  “It feeds into the, the export controls have failed… they're full of the loopholes and you know, we keep selling the equipment that actually lets them make the chips.” (Bill Bishop, 13:19–13:46)

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Important Segments & Timestamps

• Super Micro Indictment Discussed: [00:25–07:21]
• Nvidia’s Role and Export Control Failures: [04:21–07:54]
• Congressional Reaction and Policy Implications: [07:54–10:06]
• Technical Loopholes and Industry Dynamics: [10:06–15:50]
• Whistleblowing and Future Risks: [15:50–16:29]
• Xiong’an New Area Overview: [16:33–end of preview]

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Tone and Language

The conversation is informal, deeply informed, and often wry—especially regarding the absurdity and cynicism around global chip smuggling and regulatory failures. The hosts blend technical insight with skepticism, particularly toward corporate PR spin and government enforcement efforts.

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Summary for New Listeners

This preview episode delivers a fast-paced, insider’s overview of the US-China chip smuggling scandal involving some of the world’s most valuable technology, highlighting the elaborate methods used to circumvent export controls, the systemic failure of enforcement, and the complex, often contradictory pressures facing both corporations and policymakers. It emphasizes that while political leaders wrangle over how best to maintain US technological leadership, the ground reality is a messy cycle of innovation, evasion, and regulatory struggle—one with global implications for competition and security.

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Note: The episode preview concludes just as the discussion turns to China’s Xiong’an New Area, promising further insight for subscribers.

Transcript

[A]

Foreign.

[B]

Welcome to Sharp China. I'm Andrew Sharp and you are listening to a free preview of today's episode.

[A]

Hello and welcome back to another episode of Sharp China. I'm Andrew Sharp and on the other line, Bill Bishop. Bill, how you doing?

[C]

Hello. I'm doing well. Hope everyone out there is doing well too.

[A]

There you go. It's good to be back. We're making our way through March here. We are going to begin the show today not with the war in Iran, but with news that surfaced late last week. I ended last week's episode saying there was tech news, that we would roll over to the following episode. Then after we finished recording a day later, there was even more tech news. So I'm going to read from cynicism Monday. And an indictment that surfaced last Friday. Federal prosecutors have charged three people, including Wally Lia and a co founder and senior vice president of Super Microcomputer with running a $2.5 billion scheme to illegally divert AI servers containing high powered Nvidia GPUs to China in violation of US export control laws. The servers were shipped from the US to Taiwan, then to Southeast Asian intermediaries who repackaged them in unmarked boxes, stripped and reaffixed serial numbers using hair dryers to defeat audits, and created false documentation to make it appear the Chinese end users were actually legitimate local customers. Liao was arrested two days after Nvidia CEO Jensen Huang was photographed warmly greeting him at Nvidia's annual developer conference. A picture Super Micro had just posted to celebrate their continuing partnership. So what a mess. Bill, what was your reaction to the details in this story and the potential implications for US chip policy?

[C]

So there had been reports of Super Micro facilitating smuggling of export controlled Nvidia chips for some time. Reuters had a story back in almost two years ago, April 2024, titled China acquired recently banned Nvidia chips and Super Micro Dell servers tender show Super Micro hired a very powerful, aggressive law firm called Clairlock, which sent him a letter basically saying, you know, their client goes above and beyond what US export restrictions require. Obviously either Clairlock was not being honest or they were misinformed by their client.

[A]

Perhaps they were unaware of the Hairdryer scheme.

[C]

Yes, I mean, I mean, so, so, so when you step back right in the indictment, I mean you've had multiple denials and basically just sort of very aggressive like doesn't happen, smuggling can't happen. From Jensen Huang, from David Sachs. You know, talking about these things, these servers are so big, it's not like you put it in a Briefcase forgetting, of course, that they get shipped anyway all around the world. And when it comes to actually logistics and shipping, the Chinese shipping firms are the best in the world. Yeah, right. And so there was very disingenuous sort of pushback, I think, from. From folks who have a vested interest in the smuggling continuing. So this number 2.5 billion, you know, hard to believe that's actually it. This is just what they had enough evidence to indict people for. You know, I've really. There's another company out there called Mega Speed. It's a quote unquote Singaporean firm, New York Times had a story October last year about all the billions of Nvidia chips it was buying. That sure look like they're actually heading to users in China.

[A]

Right, yeah. In depth piece.

[C]

So on the. For this is obviously bad news for Super Micro. Bad news for the three individuals who are indicted. I do think, though, that, you know, there are probably more shoes to drop there. You know, Nvidia. There are a lot of sales of Nvidia chips into Singapore and Southeast Asia that seem to be running ahead of the end users in Singapore and Southeast Asia. And, you know, I think one of the questions that will have to be answered as they work through this indictment is did anyone in Nvidia know? And if so, who and what did they know? Yeah, because, you know, again, there's a lot of. You have many, many, many incentives.

[A]

What should they have known? What would. Just basic due diligence.

[C]

I mean, if these chips are export controlled, there's a basic requirement to actually know your customer.

[A]

Yeah, exactly Right. And sort of see no evil, hear no evil approach is not really acceptable when you're talking about national security concerns. And it's interesting because on one hand, the details in this story are unbelievable considering the size of the corporation.

[C]

It's creative. I mean, there's a lot of innovation in how they smuggle.

[A]

Well, totally. And you're talking about a $20 billion market cap company that's in a warehouse with hair dryers, you know, filing off serial numbers. But on the other hand, I think anybody who's been paying attention to this space over the last couple of years knows this stuff is happening. And I said on the show last year I would love someone to write like a good, comprehensive investigative book strictly on the seediness of the chip smuggling industry that has sprung up over the last five years here and what a lot of this has looked like on the ground. I've seen good YouTube videos to that effect. There are like that New York Times piece last year was great in depth articles here and there. But in general, the direction of travel has continued regardless of U.S. enforcement approaches. And Nvidia, every time Jensen Huang is interviewed about this, he says, no, it's not happening. It's completely exaggerated. This, that and the other thing. And it's notable that it continues to happen. And we go through one of these controversies every couple of video has no

[C]

incentive to crack down on this because one, IT sales to two, it again keeps Chinese firms using Nvidia chips. Right. The whole sort of keep them addicted to our tech stack approach. Right, sure.

[A]

And these are Blackwell chips that were involved in this particular indictment.

[C]

And three, you know, ultimately. But why you can't expect a company to self police if there are actually no penalties. Right. So unless you have more of enforcement from, you know, the government, why would, what's the incentive to stop?

[A]

Right, right. Yeah. And more sort of consequences for negligence, I would say. Yeah. I mean, it's funny because my read on it is if companies are going to be going to these lengths to full compliance investigators, because that's what was happening in some of these cases is somebody from Commerce would show up to inspect one of these warehouses and they had dummy servers there for, for the commerce people to inspect. My read on it is that on one hand Commerce needs more funding for more sophisticated enforcement, but beyond that, there should probably just be more burden shifting to a company like Nvidia to actually police and monitor where its chips end up because that seems like the only effective way to actually enforce export controls like Commerce. It's a policy.

[C]

Otherwise it only matters if there's, if there's actually consequences. Right. I mean, you know, companies are going to do what they're going to maximize shareholder value. Right. And it involves selling more stuff. I mean, you look at what TSMC did where, you know, they got busted, you know, making chips for, I think it was called Softco, which was a cutout for Huawei making chips that were, they should not have been allowed to make. And you know, tsmc, that they didn't, they weren't incented to do their due diligence until the US government threatened, you

[A]

know, big fines, didn't stop. Right. But didn't necessarily levy the fines.

[C]

But it also, I mean one thing that I think is bad, whatever happens here is potentially bad for Nvidia is, you know, there has been some real concern on Capitol Hill here about the H200, the decision to allow to grant licenses for Nvidia to sell H200 to China in the Wake of this news. Just this morning, the Financial Times has a story. Dimitri, again, the Financial Times. He's saying that there's a Republican Senator Jim Banks and Democrat Senator Elizabeth Warren wrote a letter to Commerce Secretary Howard Lutnick urging immediate action related to the large scale diversion of advanced American AI chips to China. And they demanded that the Commerce Department suspended Nvidia's licenses to export AI chips to China and Southeast Asian countries. And you know, there is, I think, real bipartisanship on the Hill, you know, that is unhappy with President Trump's decision to grant these owner licenses. Especially when, you know, if Nvidia starts selling these, you know, they have a stockpile of I think 6, 700,000 of these chips. If they have to then start manufacturing new H200 chips, they're actually taking capacity.

[A]

That's not.

[C]

Well, that's capacity. That's not going to US Firms. Right?

[A]

Yeah.

[C]

And that's high bandwidth memory. That's in the middle of a shortage. That's not going to U.S. firms.

[A]

Right.

[C]

I mean, so this could blow back on Nvidia and I think it could have some downstream impacts that are not good for the company.

[A]

Right. And reading the FT story on Tuesday, Banks and Warren added that Jensen Huang had claimed that Nvidia's customers understood that diversion was not legally permitted and that as a result, they monitor themselves very carefully. These statements were not simply wrong in hindsight. Banks and Warren. Right. They were contradicted by reporting available at the time and, and potentially misled U.S. officials. That's what I mean in terms of paying attention to this space.

[C]

Right.

[A]

There is like this periodic drip of reporting that makes clear what's happening here, so, and undermines a lot of the representations.

[C]

So like that statement from Nvidia, it's, that's why it's. There are two possibilities. One, they're just incompetent. Right. In terms of compliance, which, I mean, again, likely it's possible, but it's a pretty copy. Couple or two, they're just dissembling.

[A]

Yeah, I would say dissembling has been where Jensen has been on a lot of these issues over the last couple of years. And so like the House Foreign Affairs Committee, they're soon going to vote on the Chip Security act, which would require location verification for advanced AI chips in an effort to tackle diversion. I mean, that's been my question from the beginning is I don't understand why you can't put a little transponder on every chip to confirm that it's not. Not going someplace you don't want it to go.

[C]

You mean like the secret grain, little tech, little. Little secret thing that Bloomberg reported years ago that had China had inserted on super microchips.

[A]

I'm not familiar with that reporting.

[C]

That reporting. And I mean, that reporting was, you know, Bloomberg cited multiple people. The company pushed back. There was a lot of pushback, saying the story was fake. We just don't know.

[A]

But, you know, so was that monitoring super microchips?

[C]

That was. No, that was basically giving. Giving a backdoor into any, you know, any super microchips. Right. Wherever they were used. Right. So, yeah, give me a backdoor in the data centers.

[A]

So we know how China would handle this. It's a question, an open question. Why has the US Been so complex?

[C]

So, okay, so it's called. The story was. God, it was eight years ago. Okay, so it was called. The story was the big hack in Bloomberg in October of 2018.

[A]

Okay.

[C]

And their headline, you know, the big hack, How China used the Chinese Tiny chip to infiltrate US companies. The attack by Chinese spies reached almost 30 US companies, including Amazon, Apple, by compromising America's technology supply chain, according to extensive interviews with government and corporate sources. Now, there was a lot of pushback on this article. I think there was some reasonable debunking of it. So. But. But I'm sort of bringing it up just because Super Micro was selling the servers that had these alleged in them.

[A]

Interesting. Okay, so Super Micro is a very tainted company.

[C]

They've had accounting issues that they are a, I think, you know, might be better termed a sketchy micro. Um, and now. Now we're sorry if your lawyers are listening, you know, I don't.

[A]

You know, that's right. Claire Locke, thank you for subscribing.

[C]

No, but honestly, I mean, you look at the history of Super Micro, it's. It. You know, this sort of fits with kind of, I think, a lot of how they've been rolling over the years.

[A]

Yeah. Well, we'll see whether anything else emerges on the policy front, but clearly Congress is paying attention here. I do. As far as Nvidia's business, there is a push in Congress to sell everything to America before you can start selling to the rest of the world. And the idea of banning exports to more countries than just China in Asia seems like a slippery slope to go down and could potentially leave the door wide open for China to replace Nvidia and displace the AI software stack, the American AI software stack that the whole world is running on. So there is some tension strategically in terms of what the optimal Outcome is, but there's also just basic competence in enforcement and enforcing the policies that are actually on the books now. And keeping Blackwells out of China.

[C]

And it feeds into the, the export controls have failed. I mean, one, if China, you know, if the export controls have caused China to develop their indigenous chip industry, why do all the companies still want Nvidia chips?

[A]

It is pretty interesting.

[C]

Yeah, right. And two, can you talk about, or can you make the argument they've failed without actually making. Talking about how the export controls haven't actually been enforced? Well, that's the thing. They're full of the loopholes and you know, we keep selling the equipment that actually lets them make the chips. I mean, it's just, it drove me

[A]

crazy going into the Trump administration. You mentioned that we might be at peak chip control and I think you were right in retrospect because there hasn't been any stepped up enforcement. And if anything there's been. Well, I would say no, there's been. No, we've been.

[C]

No, there's been. You look at how the bis, the enforcement mechanism at commerce has been gutted. I think from a substantive perspective, the enforcement has been effectively gutted.

[A]

Relaxed and.

[C]

Gutted. Relaxed, ok, relaxed maybe is a better

[A]

term, but in terms of like the substantive infrastructure that's going to China, I don't think there's been that much change from where we were. However, the arguments that there should be more relaxed policies dating back a year and a half ago and have continued ever since. The idea that chip controls just don't work, One, they are clearly working when you look at the compute constraints that China is facing. And two, they have been enforced in this schizophrenic way since the beginning, dating back to 2022. So it's just really maddening when people turn around and say, well, look, look at how far China has come. We shouldn't bother doing any of this anyway. It's just kind of an illogical, a factual argument to make. But I suppose. And also, I mean, making that argument

[C]

and also I just, I just think we, you know, that people were circulating sort of all the times that Jensen Huang and David Sacks have said there's no smuggling happening. I mean, the problem really is I

[A]

would find Jensen Wong so much more credible if he admitted that there was smuggling happening and committed to cracking down on it. But the see no evil, hear no evil approach from him, Sachs and others.

[C]

Well, I mean, but again, why, why crack down on it unless you're presented with incontrovertible evidence that is going to lead you to be penalized unless you act.

[A]

Yeah, unfortunately, that's probably what's required here. When I talk about burden shifting to Nvidia, that's what I mean is say, look, this is on you and if you don't follow through, there are going to be financial consequences for you.

[C]

You know, I mean, again, maybe no one in Nvidia didn't knew, maybe no one in the sales team understood what really was happening with these chips. Certainly possible. Maybe people knew and maybe, you know, whistleblower laws, you get a big, you get a big chunk of the settlement if you whistleblow the US Government and they, they end up finding a company a lot of money. There you go.

[B]

Third.

[A]

Oh, yeah, it's actually, you know, pretty lucrative for the whistleblowers out there.

[C]

Got you. Go Whistleblower. A company that gets a billion dollar fine, you get 300 and something million dollars net. Your legal, their lawyers, contingency fees. Right. It's not a bad deal. Well, so again, I just think they're

[A]

the rich pageant of chip controls.

[C]

I would, I would just say that I think there might be other shoes to drop.

[A]

Okay, well, stay tuned. Of course, everyone will stay tuned and chronicle the saga of US Chip policy on this podcast. For now, we can shift gears as Xi took three standing committee members and three other Politburo members to inspect Xiang on his fourth visit to the new city since 2017. For people who are unaware, this is in hebei province, about 60 miles south of Beijing. A CCTV report noted that practice has fully proven that the Central Committee's decision to build the Xiong' an new area is completely correct. What is the Xiong' an new area? Can you tell people more about this city that's being built from scratch?

[C]

It's, it's, it's a new, whole new city that Xi Jinping decided to build in a swampland south of Beijing.

[B]

All right, and that is the end of the free preview. If you'd like to hear the rest of today's conversation and get access to full episodes of Sharp China each week, you can go to your show Notes and subscribe to either Bill's newsletter, Cynicism, or the Stratechri Bundle, which includes several other podcasts from me and daily writing from my friend Ben Thompson. I'm an incredibly biased news consumer, so I think both are indispensable resources. But either way, Bill and I are going to be here every week talking all things China, and we would love to have you on board. So check out your show notes. Subscribe and we will talk to you soon.