Server maker sues Elon Musk's X for not paying for hardware — Wiwynn claims over $61M in unpaid hardware bills

X (formerly Twitter), an Elon Musk company, is embroiled in a legal dispute with Wiwynn, a server maker that belongs to Wistron, over $61 million in unpaid hardware bills, reports Business Insider. Wiwynn is not the only company that makes such accusations against X; MiTAC, another Taiwanese server supplier, was similarly impacted in the fourth quarter of 2022, reports United Daily News.

The conflict between Twitter and Wiwynn arose after Elon Musk took control of Twitter in 2022 and implemented significant cost-saving measures, including renegotiating supplier contracts, which led to a halt in payments for server parts worth around $120 million, reports The Register. Wiwynn claims that X failed to honor a Master Purchase Agreement in 2014 under which it would submit its infrastructure requirements to Wiwynn, approve its proposed list of custom servers, and pay for it. After Musk's acquisition of the social media platform, the company allegedly stopped paying for these products and cut off communication with Wiwynn. This abrupt cessation of payments has now led to the lawsuit.

The Taiwanese firm had accumulated $120 million of server components to fulfill X's orders, expecting Twitter to take responsibility for the costs. However, after the payment stoppage, Wiwynn could only cancel about $40 million of these parts that were not delivered and then resell the remaining $19 million worth of equipment. The lawsuit seeks damages for the remaining $61 million, the cost of components custom-designed for X that could not be sold elsewhere.

Wiwynn was not alone, as MiTAC also encountered payment issues after Musk's takeover in the fourth quarter of 2022, reports UDN. The company recorded a substantial NT$1.4 billion ($43.71 million) write-down due to delayed payments from Twitter, which contributed to significant financial losses. Yet, MiTAC did not directly accuse X of not paying the bills. Eventually, the company mitigated losses by reselling or reclaiming the reserved components initially intended for Twitter, which allowed it to post strong results in Q2 2023.

X and Wiwynn have so far declined to comment on the legal proceedings.