Malaysia Strengthens Semiconductor Regulations in Response to U.S. Demands to Limit AI NVIDIA Chip Exports to China.
Malaysia is poised to strengthen its semiconductor regulations in light of U.S. worries about the illicit transfer of advanced artificial intelligence (AI) chips to China. The United States has urged Malaysia to diligently oversee the entry of high-performance Nvidia chips into the country, seeking to avert their diversion to China in breach of U.S. export controls.
In October 2022, the United States implemented strict export controls on high-performance semiconductors to China, aiming to impede the progress of China's AI sector. Nonetheless, reports suggest that Chinese traders have successfully procured Nvidia's desirable AI processors via secondary markets in countries such as Malaysia, Vietnam, and Taiwan.
In response to these developments, Malaysia has formed a task force to enhance regulation in this area. The U.S. has urged Malaysia to ensure that servers equipped with Nvidia chips are delivered to their designated data centers and are not diverted elsewhere.
Recently, authorities in Singapore apprehended nine individuals thought to have been involved in fraudulent sales of servers containing Nvidia chips. This operation allegedly included the transfer of Nvidia AI chips to China through Malaysia, with transactions amounting to roughly 390 million dollars.
Malaysia is looking into whether these server shipments breached local laws. U.S. officials suspect that Nvidia chips brought into Malaysia might ultimately have reached China. So far, the Malaysian investigation has not uncovered evidence that the chips arrived at the Malaysian data centers they were claimed to be intended for.
Tracking chip movements proves difficult due to the intricacy of the global supply chain, which involves manufacturers, suppliers, buyers, and companies involved in server production and distribution. The U.S. is also pressuring its companies to ensure that products arrive at their correct destinations. While enforcement may seem straightforward, it is quite complex.
In January 2025, the U.S. enacted the "Export Control Framework for Artificial Intelligence Diffusion," a new regulation that places Malaysia in Tier 2, capping access to advanced AI chips like GPUs to a maximum of 50,000 units over two years.
The prospective introduction of export restrictions by the U.S. government on AI chips is not anticipated to affect the operations of existing data centers in Malaysia. However, Malaysia is taking a cautious stance to assess any potential repercussions on future initiatives. The government intends to consult stakeholders and the U.S. administration to fully grasp the implications of the proposed rules.
Malaysia remains dedicated to broadening its semiconductor market beyond the U.S., with aspirations to enhance exports to ASEAN, the Middle East, countries of the Commonwealth of Independent States, and Africa to minimize reliance on a single market.
This situation highlights the intricacies of global semiconductor supply chains and the difficulties nations encounter in balancing technological progress with adherence to international regulations.
In response to these developments, Malaysia has formed a task force to enhance regulation in this area. The U.S. has urged Malaysia to ensure that servers equipped with Nvidia chips are delivered to their designated data centers and are not diverted elsewhere.
Recently, authorities in Singapore apprehended nine individuals thought to have been involved in fraudulent sales of servers containing Nvidia chips. This operation allegedly included the transfer of Nvidia AI chips to China through Malaysia, with transactions amounting to roughly 390 million dollars.
Malaysia is looking into whether these server shipments breached local laws. U.S. officials suspect that Nvidia chips brought into Malaysia might ultimately have reached China. So far, the Malaysian investigation has not uncovered evidence that the chips arrived at the Malaysian data centers they were claimed to be intended for.
Tracking chip movements proves difficult due to the intricacy of the global supply chain, which involves manufacturers, suppliers, buyers, and companies involved in server production and distribution. The U.S. is also pressuring its companies to ensure that products arrive at their correct destinations. While enforcement may seem straightforward, it is quite complex.
In January 2025, the U.S. enacted the "Export Control Framework for Artificial Intelligence Diffusion," a new regulation that places Malaysia in Tier 2, capping access to advanced AI chips like GPUs to a maximum of 50,000 units over two years.
The prospective introduction of export restrictions by the U.S. government on AI chips is not anticipated to affect the operations of existing data centers in Malaysia. However, Malaysia is taking a cautious stance to assess any potential repercussions on future initiatives. The government intends to consult stakeholders and the U.S. administration to fully grasp the implications of the proposed rules.
Malaysia remains dedicated to broadening its semiconductor market beyond the U.S., with aspirations to enhance exports to ASEAN, the Middle East, countries of the Commonwealth of Independent States, and Africa to minimize reliance on a single market.
This situation highlights the intricacies of global semiconductor supply chains and the difficulties nations encounter in balancing technological progress with adherence to international regulations.
