Supermicro, a major server manufacturer, is facing potential delisting after failing to submit its financial report on time. Previously, the Economic Daily News reported that the company had halted expansion of its Malaysia plant. However, in response to inquiries from the Central News Agency, Supermicro clarified that its plans for the Malaysia facility remain unchanged, with production set to commence by the end of this year, and emphasized that customer orders are “still robust.”

According to the Economic Daily News, Supermicro’s Malaysia plant was originally scheduled to come online in the fourth quarter, doubling the company’s production capacity. However, amid financial turmoil, the project has been temporarily delayed. In response, YTL Group, a key client in Malaysia with close ties to Nvidia, has shifted its AI server orders to Wiwynn’s Malaysia facility, a subsidiary of Wistron, for local support.

When asked about the potential order transfer due to the Supermicro incident, Wistron declined to comment on individual clients and products.

In a written statement to the Central News Agency, Supermicro reiterated, “As previously announced, our Malaysia facility is on track to commence production and shipping by the end of 2024. This plan remains unchanged.”

Supermicro further noted, “We continue to secure substantial business in Malaysia within a highly competitive market, meeting all approved orders on schedule, and customer demand remains strong.”

Founded in 1993 by Taiwanese CEO Charles Liang, Supermicro has benefited from the AI boom, posting exponential growth in revenue each of the past three quarters. However, it missed its financial reporting deadline amid media reports in late September alleging accounting issues, now under investigation by the U.S. Department of Justice.

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• [News] Supermicro’s Financial Crisis Shifts Malaysia’s YTL Group Order to Taiwanese Firm

(Photo credit: Supermicro)

According to a report by Economic Daily News, Supermicro’s ongoing financial crisis has reportedly led to the suspension of its planned expansion at its Malaysia facility, which was set to double its production capacity. This disruption has prompted Supermicro’s major client, Malaysia’s largest conglomerate and a top NVIDIA AI server buyer, YTL Group, to shift its substantial AI data center order.

The same report indicates that YTL Group is now turning to Wistron Group’s Malaysian subsidiary, Wiwynn, for nearby support to fulfill the order, which involves substantial deliveries of NVIDIA’s high-end GB200 NVL72 full-rack servers.

Industry insiders cited by Economic Daily News previously speculated that NVIDIA would lead any order reallocation; however, this shift originates from Supermicro’s client, YTL Group, whose choice of Wiwynn is strategic. Wiwynn’s plant is situated near Supermicro’s new facility in Malaysia, offering a geographical advantage and boasting robust AI server capabilities.

YTL Group has strong ties with NVIDIA. In March, YTL Power, a subsidiary of YTL Group, announced a partnership with NVIDIA to install DGX GB200 NVL72 AI server systems, aiming to establish a green AI data center in Johor, Malaysia.

Originally, YTL’s sizable AI data center project was to be shared between Supermicro and Wiwynn. Supermicro’s Johor plant was expected to double capacity with a new line in Q4, but this plan has been delayed due to financial issues. Wiwynn’s nearby plant has also been expanding, enhancing its one-stop manufacturing services and adding advanced cooling technologies such as direct liquid cooling and immersion cooling to handle the redirected order.

Supermicro CEO Charles Liang, speaking at COMPUTEX 2024, previously unveiled the company’s ambitious Malaysia expansion, aiming to double its output to 10,000 server racks per month by Q4. With the expansion now halted, orders have shifted to Wiwynn.

Wiwynn’s new plant in Johor began assembling server racks last October, and a second phase focusing on motherboard production is expected to go online later this year, with potential plans for a third plant.

Economic Daily News reports that Johor, Malaysia’s largest data center investment hub and the ninth-largest in the Asia-Pacific, currently hosts 13 data centers, with four more under construction. The region’s affordable land, water, and power resources, along with its proximity to Singapore, have drawn multinational companies such as Australia’s AirTrunk and Microsoft, which recently acquired land in Johor for a new data center.

(Photo credit: YTL Power)

Supermicro, a major beneficiary of the AI boom, saw its stock plunge after Ernst & Young resigned as its auditor, raising market concerns. According to a report from Liberty Times, citing Chinese media outlet Cailian Press, NVIDIA, which has close ties to Supermicro, is shifting orders that were previously directed to Supermicro to other suppliers in order to avoid market disruptions.

According to the report, Supermicro’s competitors, GIGABYTE and ASRock, have benefited from the order transfer, seeing an increase in new orders and customer inquiries.

On October 30th, Supermicro announced that Ernst & Young, one of the Big Four accounting firms, had severed ties with the company. In its resignation letter, Ernst & Young stated that it was “unwilling to be associated with the financial statements prepared by management” and could “no longer rely on management’s and the Audit Committee’s representations” regarding their relationship with Supermicro.

The report noted that this statement caused Supermicro’s share price to drop sharply, plunging 32% that day. The company is now facing the risk of delisting.

Previously, on August 27, Supermicro was accused of accounting violations, inadequate disclosure of related party transactions, and evading sanctions by selling products to Russia by Hindenburg Research. The following day, Supermicro also announced a delay in submitting its 2024 fiscal year 10-K annual report.

According to a report from Wall Street Journal in late September, Supermicro was under the investigation of the U.S. Department of Justice.

The report from Liberty Times citing Cailian Press indicated that if the rumors about NVIDIA’s order transfer turn out to be true, it would undoubtedly be a further blow to the troubled firm.

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• [News] Supermicro Denies Short-Selling Claims, as its CEO Responds for the First Time After the Controversy
• [News] Taiwanese Supply Chain to Benefit from Supermicro’s Order Withdrawal, with Dell and HP as Potential Beneficiaries

(Photo credit: Supermicro)

Despite U.S. export controls aimed at preventing Chinese companies from acquiring advanced AI chips, small cloud service providers in China have reportedly found ways to obtain NVIDIA’s A100 and H100 chips. The cost of renting cloud services in China is even lower than in the U.S.

According to a report from the Financial Times, four small-scale Chinese cloud providers are offering servers equipped with eight A100 chips each, charging around USD 6 per hour. In comparison, similar services from U.S. cloud providers cost approximately USD 10 per hour.

As Chinese companies are reportedly bypassing U.S. export controls, industry sources cited by the Financial Times have further noted that the lower prices in China may hint at a robust local supply of NVIDIA chips.

Since the fall of 2022, the U.S. has banned NVIDIA from supplying A100 chips to China, and the more powerful H100 chips have not been approved for sale there.

However, industry sources and startups have revealed that these chips are still available in China. Ads for A100 and H100 have appeared on social media platforms like Xiaohongshu and e-commerce sites such as Taobao, with prices higher than those abroad.

At the Huaqiangbei electronics market in Shenzhen, reportedly, industry sources have revealed that the price of NVIDIA’s H100 is quoted at USD 23,000 to USD 30,000, while Chinese online sellers list it at USD 31,000 to USD 33,000.

Meanwhile, larger Chinese cloud providers such as Alibaba and ByteDance emphasize service stability and security in the local market. For servers equipped with A100 chips, they charge two to four times more than smaller cloud providers.

According to another source cited by Financial Times, large companies must consider regulatory compliance, which puts them at a disadvantage because they are reluctant to use smuggled chips. In contrast, smaller providers are less concerned.

The same report also indicate that after the US government tightened export controls in October last year, servers from Supermicro equipped with eight H100 chips were priced as high as approximately CNY 3.2 million. However, as supply constraints eased, the price has dropped to around CNY 2.5 million.

Several sources cited by the report claim that merchants from Malaysia, Japan, and Indonesia frequently ship Supermicro servers or NVIDIA chips to Hong Kong, from where they are then transported to Shenzhen.

In response to these issues, NVIDIA reportedly stated that it primarily sells chips to well-known partners, ensuring that all sales comply with U.S. export regulations.

NVIDIA also mentioned that its used products can be obtained through various channels and, although they cannot track products after sale, they will take appropriate action if they determine a customer is violating U.S. export controls.

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• [News] China’s 1H24 Chip Equipment Purchases Exceed Taiwan, Korea, and US Combined, Reaching USD 25 Billion
• [News] China Contributes Over 40% of U.S. Chip Equipment Makers’ Revenue despite Export Controls

(Photo credit: iStock)

According to a report from Reuters, on September 3, Supermicro denied the short-selling report from Hindenburg Research released the previous week, characterizing it as containing false or inaccurate statements about the company.

Supermicro stated that the report included misleading statements about information they previously disclosed, and the company plans to address these claims at the appropriate time, without providing further details.

As of now, Hindenburg has yet responded to the request for comment on Super Micro’s statement.

On August 27, AI server giant Supermicro was accused of accounting violations, inadequate disclosure of related party transactions, and evading sanctions by selling products to Russia by Hindenburg Research.

The following day, Supermicro also announced a delay in submitting its 2024 fiscal year 10-K annual report, citing the need for more time to assess the design of internal controls and operational effectiveness.

Hindenburg Research stated that it conducted a three-month investigation, including interviews with its former senior employees, as well as a review of litigation records, international corporate and customs records.

On the other hand, Supermicro reiterated that the delay in filing its fourth-quarter or fiscal year report will not result in any significant changes.

Supermicro President Charles Liang further emphasized that these events will not affect the company’s products or its ability to provide IT solutions, as its productivity remains unaffected and continues to operate at a pace that meets customer demands.

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• [News] Taiwanese Supply Chain to Benefit from Supermicro’s Order Withdrawal, with Dell and HP as Potential Beneficiaries
• [News] Supermicro Faces Order Withdrawal Crisis, Potentially Benefiting Dell

(Photo credit: Supermicro)