PETALING JAYA: Malaysia is set to tighten semiconductor regulations amid US pressure to curb the unauthorised flow of advanced artificial intelligence (AI) chips to China.
Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said Washington has asked the country to closely track the movement of high-end Nvidia chips that enter the country, over suspicion that many are ending up in China, in violation of US export rules.
“The United States is asking us to make sure that we monitor every shipment that comes to Malaysia when it involves Nvidia chips,” Tengku Zafrul told the Financial Times.
“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.”
Malaysia has emerged as one of the fastest-growing hubs for data-centre development, with much of the activity centred in Johor.
Over the past 18 months, Johor has attracted more than US$25bil in investments from companies such as Nvidia Corp, Microsoft Corp, and TikTok owner ByteDance Ltd to establish data centres.
The state has also recently entered into an agreement with Singapore to create a special economic zone.
Tengku Zafrul added that he had established a task force with Digital Minister Gobind Singh Deo to strengthen regulations around Malaysia’s rapidly growing data centres industry, which depends largely on chips from Nvidia.
Concerns over the illicit chip transfers in the region have intensified in recent weeks following Singapore’s charges against three individuals in a US$390mil fraud case linked to the suspected transfer of Nvidia chips from Malaysia to China.
Nvidia’s Singapore office accounts for nearly a quarter of its global sales, fuelling concerns among US authorities that some of the chips may be making their way into China.
However, Nvidia has clarified that the majority of its transactions involve invoicing international companies through Singapore, with only a small portion of chips physically passing through the country.
Three weeks ago, Singaporean authorities arrested nine individuals – three of whom have since been charged – after conducting raids on 22 locations in connection with suspected fraudulent sales of servers containing Nvidia chips.
The fraudulent sales included Dell and Supermicro servers, prosecutors said.
In the meantime, Singapore has requested assistance from the United States and Malaysia in investigating the movements of the servers.
Singaporean authorities had also stated that it remains unclear whether Malaysia was the final destination for the servers containing the AI chips or if they were subsequently shipped elsewhere.
Tengku Zafrul said US authorities believed the Nvidia chips ended up in China after passing through Malaysia.
However, he said the investigation had turned up no evidence that the chips arrived at the Malaysian data centre to which they were purportedly sold.
Moreover, the minister also emphasised the difficulty of tracking semiconductors through global supply chains, which involve chipmakers, suppliers and buyers as well as companies involved in manufacturing and distributing servers.
“The United States is also putting a lot of pressure on their own companies to be responsible for making sure products arrive at their rightful destination,” he said. “Everybody’s been asked to play a role throughout the supply chain.”
“Enforcement might sound easy, but it’s not,” he added.
