MALAYSIA: Malaysia denies any knowledge that data centre operators in the country are using unauthorised Nvidia artificial intelligence (AI) chips, Trade Minister Tengku Zafrul Aziz stated in an interview with CNBC. He was responding to allegations that advanced Nvidia chips, whose sales are restricted under US export controls, were fraudulently transferred from Singapore.
Singaporean authorities recently charged three individuals with fraud-related offences for allegedly misrepresenting the final users of AI-powered servers containing Nvidia processors. Singapore’s Law and Home Affairs Minister, K Shanmugam, suggested that servers implicated in the fraud case may have contained Nvidia’s artificial intelligence chips, which were subsequently sent to Malaysia, prompting concerns about possible breaches of US trade regulations.
GuruFocus reported that, in response, Malaysia has begun discussions with data centre operators, including Microsoft, Amazon Web Services, and Google, to determine if chips reached their intended users. Zafrul emphasised that Malaysia was not initially designated as the final destination for the hardware and questioned why the shipment was rerouted from Singapore.
Southeast Asia as an unwitting conduit for restricted AI chips
The unfolding issue raises broader questions about whether Southeast Asian nations like Malaysia and Singapore are unknowingly becoming intermediaries for restricted US semiconductor technology. While there is no direct evidence implicating Malaysia, Washington is already monitoring reports that Chinese AI firm DeepSeek could be acquiring restricted US chips through middlemen operating in Malaysia, Singapore, and the United Arab Emirates.
This case highlights how semiconductor supply chains are being increasingly scrutinised as US-China tech tensions escalate. Given their strong manufacturing and logistics sectors, Southeast Asian nations play a crucial role in the global electronics trade. However, the possibility that these countries could be used as loopholes in Washington’s export controls is drawing heightened attention from US authorities.
The impact of US semiconductor restrictions on Southeast Asia
The US government has imposed strict export controls to limit China’s access to advanced AI chips, particularly those produced by Nvidia. These restrictions aim to curb China’s ability to develop cutting-edge AI and military technologies. However, the ripple effects are being felt in Southeast Asia, where countries like Malaysia and Singapore host growing semiconductor industries and data centre hubs.
For Malaysia, which has positioned itself as a key player in the semiconductor supply chain, such allegations could complicate its trade relations with both the US and China. The country has committed itself to cracking down on any businesses engaged in illegal trade but also seeks to maintain its status as a neutral partner in the intensifying US-China tech rivalry.
Singapore, meanwhile, is taking legal action against those accused of misrepresenting AI chip transactions, reflecting the country’s strict enforcement of trade regulations. However, given its role as a major global logistics hub, the case underscores the challenges of monitoring the final destinations of high-tech exports.
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Public scepticism, patience, and suspicions
Reactions to the scandal from online communities have ranged from scepticism about Malaysia’s ability to track such transactions to calls for patience as investigations unfold. A Reddit user sarcastically remarked, “Even a simple letter, Malaysia can’t find, how can we find an H100 processor chip in the vast sea of Asia Pacific?”—a nod to past bureaucratic inefficiencies that fuel public doubt.
Others suggested that the full picture has yet to emerge. One comment urged caution, saying, “Let the Singapore court case resolve first. More details will likely be revealed for the cross-border media to investigate in Malaysia later.”
Meanwhile, speculation about organised criminal involvement is growing. Another user pointed out, “The news said 22 locations were raided, nine persons arrested, and three of them currently charged in court. Sounds like a syndicate may be involved in chip smuggling.”
Striking a balance in a shifting tech landscape
The Nvidia chip fraud case illustrates the complexities of enforcing semiconductor export restrictions in an era of globalised supply chains. Southeast Asian nations like Malaysia and Singapore must balance their economic interests with geopolitical realities, ensuring compliance with international regulations while maintaining their status as critical nodes in the global tech industry.
As US-China tensions continue to reshape the semiconductor market, scrutiny over chip movements through Southeast Asia is likely to increase. While Malaysia and Singapore have denied any intentional involvement in bypassing US export restrictions, their role in the semiconductor ecosystem means they will remain under the watchful eyes of Washington and Beijing alike.