Stricter Controls on Semiconductor Shipments
Malaysia is preparing to implement stricter regulations on the movement of semiconductors, particularly high-end Nvidia chips, following pressure from the United States. Concerns have been raised in Washington that these advanced chips, crucial for artificial intelligence development, are illegally reaching China despite U.S. trade restrictions.
Malaysia’s Trade Minister Zafrul Aziz confirmed that the U.S. has urged the country to closely monitor shipments of Nvidia chips entering its borders. The fear is that these semiconductors, originally intended for data centers, are being redirected to China, violating American export laws.
To address these concerns, Malaysia has established a special task force in collaboration with Digital Minister Gobind Singh Deo. This initiative aims to enhance oversight of the country’s rapidly expanding data center industry, which relies on chips supplied by Nvidia. “They want us to ensure that servers reach their intended data centers and do not get diverted elsewhere,” Zafrul told the Financial Times.
Rising Global Concerns Over Illicit Chip Trade
The U.S. has imposed strict export controls on advanced semiconductors and related equipment to limit China’s access to technologies that could have military applications. The issue has gained renewed urgency following a $390 million fraud case in Singapore, where three individuals were charged with allegedly facilitating the sale of Nvidia chips through Malaysia to China.
In the final days of Joe Biden’s presidency, the U.S. introduced a three-tier licensing system to regulate AI chips used in data centers, aiming to prevent Chinese companies from bypassing these restrictions through intermediary nations. With Nvidia’s Singapore office accounting for nearly a quarter of its global sales, Washington has raised suspicions that some of these chips are being rerouted to China.
Singaporean authorities have also taken action, recently arresting nine individuals—three of whom have been charged—following investigations into fraudulent sales of servers containing Nvidia chips. Prosecutors stated that these sales involved major brands such as Dell and Supermicro. Singapore has sought cooperation from both the U.S. and Malaysia to track the movement of these servers and uncover potential breaches of trade regulations.
Malaysia’s Role in the Data Center Boom
Malaysia has rapidly emerged as a key player in the global data center industry, attracting significant investments from tech giants like Nvidia, Microsoft, and ByteDance. The southern state of Johor has been at the center of this expansion, securing over $25 billion in investments in just 18 months. Recently, Malaysia and Singapore agreed to establish a special economic zone to further boost the sector’s growth.
Despite U.S. concerns, Zafrul maintained that investigations have yet to find direct evidence linking Malaysia’s data centers to illegal chip transfers. He also highlighted the complexities of tracking semiconductors across global supply chains, which involve multiple stakeholders, including chipmakers, suppliers, manufacturers, and distributors.
“The U.S. is also pressuring its own companies to ensure these chips reach their rightful destinations,” he explained. “Everyone in the supply chain is being asked to take responsibility.”
While Malaysia remains committed to enforcing trade regulations, Zafrul acknowledged the challenges ahead, stating, “Enforcement might sound easy, but it’s not.”
