Malaysia controls AI chip exports as US targets China smuggling

Malaysia will now require permits for exports of high-performance US artificial intelligence chips, suggesting the government is seeking to clamp down on potential diversion of the sensitive components to places like China.

Effective immediately, individuals and companies must notify Kuala Lumpur at least 30 days prior to exporting or shipping such hardware, Malaysia’s trade and industry ministry said Monday. They must inform the agency if they know or “have reasonable grounds” to suspect the items will be misused or used for restricted activities.

Malaysia “will not tolerate the misuse of Malaysia’s jurisdiction for illicit trading activities,” the ministry said. Kuala Lumpur has come under increasing pressure from Washington — which has effectively banned the sale of advanced AI chips to China since 2022 — to halt the suspected flow of those parts to China via intermediaries in Malaysia.


Malaysian authorities said in March that they would tighten regulations on the country’s burgeoning data center industry, which relies on chips from the likes of Nvidia Corp. The new permit requirements aim to “close regulatory gaps,” according to the ministry’s statement, while Malaysia “undertakes further review” of the potential inclusion of AI chips to a national list of items covered by the Strategic Trade Act.

The ministry did not immediately respond to questions about whether the controls came at Washington’s urging.

Semiconductor sales to Malaysia also are a focal point of a court case in neighboring Singapore, where prosecutors charged three men with defrauding customers about the ultimate destination of AI servers — originally shipped from the island nation to Malaysia — that may have contained advanced Nvidia chips. Malaysia said in March that its investigation into the matter hadn’t uncovered evidence of such shipments, and that the country will continue to monitor for possible fraud. Nvidia has not been accused of any wrongdoing in Singapore’s investigation.

Malaysia is a key part of the AI supply chain, home to many facilities used for developing and deploying AI models. American companies including Oracle Corp. are massively expanding their data center footprints in the country, which saw an increase in imports of crucial components this year — particularly in April, the month before the US was expected to start requiring licenses to ship AI chips to Malaysia and many other countries.

President Donald Trump’s administration decided not to move forward with that policy in May, though officials have since drafted a separate regulation that would mandate such approvals for AI chip shipments to Malaysia and Thailand in particular — an effort that seeks to crack down on suspected semiconductor smuggling into China, Bloomberg has reported. That rule is not yet finalized and could still change.

Nvidia Chief Executive Officer Jensen Huang has said there’s “no evidence” of AI chip diversion, in general remarks that didn’t touch on any particular country. In response to earlier Bloomberg queries about the potential US curbs, Malaysia’s trade ministry said that it welcomes dialogue with the US and other nations to “clarify any misunderstandings,” while also warning that unilateral restrictions could disrupt legitimate trade and hamper innovation.The ministry — which, like many others in Asia, is currently hammering out a trade deal with US officials — added that “all matters related to Malaysia-US bilateral trade are interlinked, each having its own unique role in the current trade negotiations.”