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#17 Supermicro

All you need to know about Supermicro, the US computer firm allegedly compromised by Chinese spies

Silicon Valley-based computer maker Super Micro Computer (Supermicro) saw its share price plummet more than 40 per cent after a Bloomberg BusinessWeek report on Thursday alleged that it sold servers compromised by Chinese spies to major US tech firms including Apple and Amazon. Here’s what you need to know about the company.

What does it do?

Headquartered in San Jose, California, Supermicro was founded in 1993 by Taiwanese American Charles Liang. It specialises in server motherboards – products that connect all the system components in a computer and allows them to interact. While the company engineers the motherboards mostly at its US headquarters, the products are almost entirely manufactured by contractors in China.

What is the allegation against it?

The Bloomberg story alleged that Supermicro’s motherboards had been compromised by Chinese interests. Citing 17 unnamed government and corporate sources, it said Chinese spies had planted tiny microchips inside motherboards used by about 30 American companies – including Apple and Amazon – and multiple government agencies, giving Beijing access to their internal networks.

In a statement on Thursday Supermicro said it has “never found any malicious chips, nor been informed by any customer that such chips have been found”. Apple and Amazon also disputed the accuracy of the report.

Why is it important?

China is a near monopoly in the global electronics supply chain. As Bloomberg noted, hardware hacks are “more difficult to pull off and potentially more devastating, promising the kind of long-term, stealth access that spy agencies are willing to invest millions of dollars and many years to get”.

The report also comes amid growing tensions between the US and China over their prolonged trade war, with US vice-president Mike Pence claiming in a speech on Thursday that Chinese security agencies have masterminded the “wholesale theft of American technology”, including military blueprints.

How does Supermicro measure up?

Supermicro is one of the world’s biggest sellers of server motherboards, as well as a leading player in the US$1 billion market for boards used in specialised computers.

For the fiscal year ended June 30, 2016, the company recorded US$72 million in net income, down 30 per cent from a year earlier, according to a corporate filing. IBM’s cloud business, formerly known as SoftLayer, was the single biggest client during the period, accounting for 10 per cent of its US$2,215 million total net sales.

As of June 2016, Supermicro had about 2,600 full-time employees, with about 40 per cent in research and development, according to the filing. The company has international offices in the Netherlands, Taiwan, China and Japan, mostly focusing on sales.

The company has not been able to file financial reports for the fiscal years of 2017 and 2018, citing accounting reasons for the delay.

Who is Charles Liang?

Liang, 60, is Supermicro’s co-founder, chief executive and chairman of the board. He is also the single largest shareholder with a 15 per cent stake. An immigrant from Taiwan, he holds a master’s degree in electrical engineering from the University of Texas.

Supermicro is known as a one-man show under Liang, who micromanages everything from custom orders to marketing to promotions. “If he says a product will be on schedule, it will be on schedule. This is not driven on fear. It’s driven on belief,” a company executive told The New York Times in 2008.

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