Malaysia is set to strengthen its control over semiconductor shipments, following pressure from the US to prevent unauthorised transfer of advanced chips, essential for AI development, to China, Financial Times reported quoting the Malaysian trade minister.
According to the report, the US authorities have urged Malaysia to enhance monitoring of Nvidia chip movements. This request came amid concerns that these components are being rerouted to China, bypassing export controls. In response, Malaysian Investment, Trade and Industry Minister Zafrul Aziz told the publication that he has established a task force with Digital Minister Gobind Singh Deo to implement tighter regulations on Malaysia’s growing data centre sector, which heavily depends on Nvidia’s technology.
“They want us to make sure that servers end up in the data centres that they’re supposed to and not suddenly move to another ship,” Aziz told the Financial Times.
US’ export restrictions on advanced AI chips
The move comes as part of a broader effort by the US to restrict exports of advanced semiconductors and related equipment. The restriction is primarily aimed to impede China’s progress in cutting-edge technologies, including AI, which could be used for military purposes.
The controls include a three-tier licencing system for AI chips used in data centres, introduced in the final days of President Joe Biden’s administration. The aim is to prevent Chinese firms from acquiring restricted chips through third-party countries.
Recent events have intensified regional concerns about the illegal chip trade. In Singapore, three individuals were indicted in a significant fraud case involving $390m, suspected of facilitating the sale of Nvidia chips through Malaysia to China. Three weeks ago, Singaporean authorities arrested nine individuals with charges of fraudulent server sales containing Nvidia chips. The US and Malaysia have been asked to assist Singapore in tracing the server shipments.
Nvidia’s Singapore subsidiary is responsible for nearly a quarter of the company’s worldwide sales. It has been under scrutiny with suspicions that some shipments might be diverted to China. However, Nvidia claims that the majority of these transactions are merely invoicing international firms through Singapore, with minimal physical movement of chips through the country.
Malaysian officials, including trade minister Zafrul, have acknowledged that the US believes that Nvidia chips could be reaching China via Malaysia. However, no conclusive evidence has been found. Zafrul also highlighted the complexity of tracking semiconductors through intricate global supply chains, which involve manufacturers, suppliers, buyers, and server distribution entities.
Malaysia’s data centre market, particularly in Johor, has seen rapid growth, with over $25bn in investments from companies like Nvidia, Microsoft, and TikTok’s parent company ByteDance.
Recently, Malaysia signed a $250m agreement with UK-based chip design firm Arm Holdings in a bid to improve semiconductor production.
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