Wiwynn recently filed a lawsuit in the US District Court for the Northern District of California, accusing X (formerly known as Twitter) of breaching an eight-year-long business agreement. The complaint reveals several details of their transaction history.
Since November 2022, X ceased payments to Wiwynn and refused to take responsibility for inventory components it had previously committed to. This forced Wiwynn to take legal action on August 16, 2024, seeking compensation and other related expenses.
According to the complaint, X's negligence has put Wiwynn at risk of potential losses exceeding US$101 million—equivalent to 1.32% of Wiwynn's 2023 total revenue. To mitigate these losses, Wiwynn made urgent sales of some inventory components, reducing the breach amount to approximately US$61 million, 0.79% of its revenue.
DIGITIMES Research analyst Jim Hsiao noted that this issue has been ongoing for some time, and most of the estimated losses have likely been offset. He also mentioned that Wiwynn has gradually shifted its focus away from Tier 2 CSPs (cloud service providers), minimizing the impact on its current financials and revenue.
Furthermore, it appears that X is no longer a client of Wiwynn, with recent AI server procurement primarily sourced from Dell and Supermicro.
Key events in Wiwynn's Lawsuit Against X
September 24, 2014: Wiwynn and X signed a Master Purchase Agreement, marking the beginning of their collaboration.
Over the past eight years: The parties adhered to the terms of the agreement, with X consistently paying for the products delivered by Wiwynn.
November 2022: X abruptly stopped payments to Wiwynn, including for delivered products, marking the onset of their dispute.
Post-November 2022: Wiwynn made multiple attempts to communicate with X, seeking payment for outstanding invoices and resolution of the inventory components issue, but received no response.
Between November 2022 and the filing of the lawsuit: Wiwynn attempted to mitigate losses by canceling approximately US$40 million in undelivered component orders and successfully recouped around US$19 million by selling or repurposing the unused components, though a significant portion remained unsellable.
August 16, 2024: Wiwynn formally filed the lawsuit, seeking damages and other related costs from XThe Procurement Process
Collaboration Background
Wiwynn, a high-quality cloud IT infrastructure provider, specializes in designing and delivering customized computing and storage solutions for large data centers. The company can design, assemble, test, and integrate complete rack solutions tailored to customer needs.
Master Purchase Agreement (MPA): Signed on September 24, 2014, between Wiwynn and X The MPA outlined that X would provide forecast orders for products it intended to purchase. Wiwynn would then prepare a list of custom components based on these forecasts, which would only be procured after receiving written approval from X
Division of Responsibilities: Wiwynn would begin purchasing custom and non-custom components only after receiving X's written approval, with X assuming liability for any unused components if they were not incorporated into the forecasted products.
Cooperation history: For eight years, both parties followed this procedure without issues, with X making timely payments for all products delivered by Wiwynn.
Reasons for X's Payment Refusal
Payment cessation: In November 2022, X abruptly stopped making payments to Wiwynn, including for delivered products. Subsequently, X also ceased responding to Wiwynn's attempts to collect overdue payments.
Accumulation of inventory: During this period, Wiwynn purchased approximately US$120 million worth of custom and non-custom components as directed and approved by X However, as X ceased further manufacturing or delivery instructions, these components became unused inventory.
Wiwynn's efforts and outcomes: To mitigate losses, Wiwynn attempted to cancel approximately US$40 million in undelivered component orders and worked to sell or repurpose the unused components to other customers. Although Wiwynn recouped about US$19 million, many components were highly customized and could not be easily sold or repurposed.
X's Refusal to take responsibility: Wiwynn made multiple efforts to resolve the issue of unused components with X, but X continued to refuse responsibility, failing to fulfill its payment obligations under the agreement, leading Wiwynn to pursue legal action to recover the outstanding amounts.
