The U.S. government is stepping up efforts to prevent Nvidia chips from being smuggled into China through Malaysia.
Officials suspect advanced semiconductors are still reaching China despite export controls. Malaysian Trade Minister Zafrul Aziz told the Financial Times that U.S. officials are demanding strict monitoring of all high-end Nvidia chip shipments to Malaysia.
The country is now creating a task force to tighten regulations around its booming data center industry. Malaysia has emerged as one of the fastest-growing markets for data centers, attracting over $25 billion in investments during the past 18 months.
This rapid growth has apparently caught the attention of U.S. regulators concerned about potential circumvention of export restrictions. The concerns appear warranted - authorities in Singapore recently arrested nine people allegedly involved in fraudulent sales of Nvidia chip-equipped servers.
US tightens control over AI chip exports to China
The U.S. government has increasingly restricted chip exports to China through a new three-tier licensing system for AI chips. The system gives preferential treatment to 18 close allies including Germany and Japan, while imposing strict quantity limits on roughly 120 countries. China faces a complete export ban alongside Russia, Iran, and North Korea.
The Trump administration is planning additional restrictions, including limits on maintenance work by Tokyo Electron and ASML at Chinese chip factories. The new measures would also strengthen sanctions against companies like ChangXin Memory Technologies and SMIC.
For cloud providers like Microsoft, Google, and Amazon, special regulations now limit their AI computing power outside the U.S. to 50% of their total capacity. In countries beyond the closest allies, only 7% of computing power is allowed per country, though companies can apply for special permits.
Nvidia has voiced strong opposition to these measures. The chip manufacturer calls them a "far-reaching intervention" and warns they could threaten U.S. leadership in AI development.
