The US Urges Malaysia to Close “Trade Loopholes” Amid Reports of Illegal NVIDIA AI Chip Transfers to China
In a significant move aimed at tightening export controls on advanced AI technology, the United States has reportedly urged Malaysia to patch existing "trade loopholes" that have allegedly facilitated the illegal transfer of billions of dollars' worth of NVIDIA's high-end AI chips into China. According to a recent report by The Financial Times, Malaysia is now intensifying its crackdown on such unauthorized transactions, establishing a task force dedicated to closely monitoring chip shipments.
As reported, high-value NVIDIA AI chips, which face stringent US export restrictions aimed specifically at limiting China's access to critical AI hardware, have found their way into the Chinese market via indirect channels. Nations like Malaysia and Singapore have emerged as significant hubs in this process. These intermediaries import NVIDIA's restricted hardware ostensibly for domestic use, but the chips reportedly end up in China through illicit backdoor channels. Recently, authorities in Singapore apprehended three individuals accused of unlawfully supplying approximately $390 million worth of NVIDIA's AI server technology to China.
In response, Malaysian Trade Minister Zafrul Aziz stated:
"[The US is] asking us to make sure that we monitor every shipment that comes to Malaysia when it involves NVIDIA chips. They want us to make sure that servers end up in the data centers that they’re supposed to and not suddenly move to another ship."
Aziz further emphasized that, while accusations of illegal trade have surfaced, Malaysia itself is a significant consumer of AI hardware, having attracted substantial investments totaling around $25 billion from major tech firms seeking to establish local data centers. Consequently, Malaysia maintains that any allegations regarding its involvement in illicit chip transfers remain unproven, though ongoing investigations seek to clarify the matter.
If these enforcement measures become fully effective, NVIDIA may face noticeable impacts on its data center revenue, particularly because Singapore and Malaysia represent significant markets for its AI products. However, the broader geopolitical strategy from the US perspective remains clear: limiting China’s access to critical AI hardware to maintain technological leadership.
What are your thoughts on the escalating AI chip trade restrictions? How will this influence global tech competitiveness? Share your opinions in the comments!
