Malaysia is preparing to strengthen its regulations on semiconductor shipments following pressure from the United States, which is concerned that high-end Nvidia chips may be making their way to China despite strict trade controls.
Malaysia’s Trade Minister Zafrul Aziz revealed that Washington has urged the country to closely monitor the flow of advanced Nvidia semiconductors entering Malaysia, amid suspicions that some are circumventing US export restrictions and reaching China. The minister disclosed in an interview with the Financial Times that Malaysia is forming a task force, in collaboration with Digital Minister Gobind Singh Deo, to tighten oversight of the data centre industry, which relies heavily on Nvidia’s cutting-edge chips.
“[The US is] asking us to make sure that we monitor every shipment that comes to Malaysia when it involves Nvidia chips,” Zafrul said. “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.”
The United States has implemented strict export controls on advanced semiconductors and related equipment to limit China’s ability to develop next-generation technologies, including artificial intelligence, which could have military applications. The pressure on Malaysia follows a recent case in Singapore, where authorities charged three individuals in a $390 million fraud case involving suspected sales of Nvidia chips to China through Malaysia.
Washington’s concerns have been further heightened by Nvidia’s significant presence in Singapore, which accounts for nearly a quarter of the company’s global sales. US officials suspect that some of these chips are being rerouted to China, despite Nvidia’s assurances that most of its sales in Singapore are invoicing transactions rather than physical shipments passing through the country.
Singaporean authorities recently arrested nine individuals in connection with fraudulent sales of servers containing Nvidia chips, prompting the US to seek assistance from Malaysia in tracking their movements. Prosecutors have alleged that the sales involved Dell and Supermicro servers, and investigations are ongoing into whether the chips ended up in China.
Zafrul stated that while the US has expressed concerns over chips allegedly reaching China via Malaysia, no concrete evidence has surfaced linking Malaysia’s data centres to these transactions. He acknowledged the difficulty of tracking semiconductors through complex global supply chains that involve multiple layers of manufacturers, suppliers, and distributors.
“The US is also putting a lot of pressure on their own companies to be responsible for making sure they arrive at their rightful destination,” he noted. “Everybody’s been asked to play a role throughout the supply chain. Enforcement might sound easy, but it’s not.”
Malaysia has become a key hub for data centre development, particularly in the southern state of Johor, which has attracted over $25 billion in investments from major tech firms such as Nvidia, Microsoft, and TikTok owner ByteDance in the past 18 months. The country recently entered into an agreement with Singapore to establish a special economic zone aimed at fostering further digital and technological cooperation.
With growing US scrutiny and regional concerns over illicit semiconductor flows, Malaysia’s efforts to enhance regulatory oversight will be closely watched as it navigates its role in the global semiconductor supply chain while maintaining strong economic ties with both the US and China.
