Supermicro To Move Production Out Of China Over Customer Concerns: Report

'It must be causing them enough trouble that they're looking at doing it, and I'm sure the things with the tariffs, that's probably not helping matters any,' one Supermicro partner said of the company's reported decision to move production out of China over security concerns cited by U.S. customers.

Server maker Supermicro is reportedly telling suppliers to move production out of China due to security concerns cited by U.S. customers.

The report, published by Nikkei Asian Review on Tuesday, said that U.S. customers, including government-related clients, are requesting to not receive motherboards made in China over cyber espionage fears. The report cited industry sources, including one unnamed Supermicro executive.

Supermicro did not respond to requests for comment from CRN and Nikkei.

The company's reported decision comes after Bloomberg Businessweek reported last October that Chinese spies inserted a malicious microchip into Supermicro servers that were being used by Apple and Amazon Web Services to steal sensitive information. Supermicro, Apple and AWS have strongly refuted Bloomberg's findings — rebuttals that were backed by the U.S. Department of Homeland Security.

Kent Tibbils, vice president of marketing at ASI, a Fremont, Calif.-based distributor that works with Supermicro, said that while customers had initially raised concerns over Supermicro when Bloomberg's story was first published, the strong denials by Supermicro and others dashed those fears.

There were no Supermicro orders canceled as a result, according to Tibbils. He said validating a server platform can take anywhere from 3-6 months or longer, so switching server vendors can be a major, consequential decision.

"They can't just instantly change from one server platform to another. They have to go through their validation process," Tibbils said. "What could have happened is a customer could have a put a hold until further information was made available, but it didn't result in any cancellation of orders."

Tibbils said he hasn't heard about ASI customers requesting Supermicro to move production out of China for security reasons. But he said the move by Supermicro could be fueled by the ongoing impact of U.S. tariffs on Chinese imports, which is increasing costs for customers.

"I can see a lot of Supermicro's customers making that request because they did have price increases as the result of the tariffs," Tibbils said, especially since the issue has been happening longer than many customers had originally anticipated.

Dominic Daninger, vice president of engineering at Nor-Tech, a Burnsville, Minn.-based system builder and Supermicro partner, said that he hasn't heard any security concerns from customers over Supermicro's products and has seen no proof that there are issues.

"It must be causing them enough trouble that they're looking at doing it," Daninger said of Supermicro, "and I'm sure the things with the tariffs, that's probably not helping matters any."

The Nikkei report stated that Supermicro is also increasing its own manufacturing capabilities. On Monday, the company announced that it was beginning construction of a 800,000 production building in Taiwan and expanding its San Jose headquarters with additional engineering and manufacturing capacity.

"We have to be more self-reliant [to build in-house manufacturing] without depending only on those outsourcing partners whose production previously has mostly been in China," the unnamed Supermicro executive told the publication.

Supermicro isn't the only server maker moving production out of China over the country's tensions with the U.S. According to Digitimes Reseach cited by Nikkei, the percentage of motherboards made in China dropped to 50 percent last year from 90 percent in 2017.