Last week, Wiwynn, which supplies servers and components for hyperscalers, filed a lawsuit in California against X (formerly Twitter), accusing the latter of violating an equipment supply agreement signed back in 2014 and until recently observed by the social network. According to DigiTimes, details of the companies’ relationship were disclosed in the lawsuit. X, apparently, is no longer a Wiwynn client; the social network bought its latest AI servers from Dell and Supermicro.
It is stated that as of November 2022, X stopped paying Wiwynn and refused to fulfill previous obligations. Because of this, Wiwynn escalated relations with its former partner on August 16, 2024, demanding compensation. Judging by the complaint materials, Policy X threatened Wiwynn with potential losses in the amount of $101 million – this corresponds to 1.32% of the latter’s total revenue in 2023. To mitigate losses, the company had to urgently sell some components, reducing direct losses to $61 million or 0.79% of revenue. According to DigiTimes sources, Wiwynn has been dealing with this problem for some time, so a significant part of the losses seems to have been avoided.
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On September 24, 2014, Wiwynn and X signed a Master Purchase Agreement (MPA), which, in particular, covered the supply of server equipment. The MPA included an advance forecast of Twitter’s future orders. Based on the forecast, Wiwynn prepared a list of components, the purchases of which were carried out only after written approval from Twitter. Under the terms of the agreement, X was responsible for unused hardware.
For the next eight years, the companies complied with the terms of the agreement, and X (Twitter) paid in good faith for the products supplied by the partner. The last order approved and signed by Twitter involved the purchase of components worth $120 million. In November 2022, after the social network transferred to Elon Musk, who announced his intention to cut IT infrastructure costs by $1 billion/year, X stopped paying bills. including for already supplied equipment. Wiwynn tried unsuccessfully to establish contact with X, trying to obtain payments and resolve issues with the supply of components in general, but there was no response.
Wiwynn attempted to minimize potential losses by canceling approximately $40 million in component orders and recovering approximately $19 million by selling unused components or installing them in other customers’ equipment. However, many of the components were highly specialized and it was difficult or impossible to find other uses for them, which led to the lawsuit. It’s funny that against the backdrop of all sorts of litigation for every dollar, X found a cluster of once scarce NVIDIA V100 accelerators that was completely ready for work, but idle.