4-3-2025 (KUALA LUMPUR) Malaysian authorities have initiated a comprehensive investigation into allegations that US-produced artificial intelligence chips—subject to strict export controls—may have been illegally redirected to China through Singapore and Malaysia.
Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz affirmed on Tuesday that Malaysia would take “necessary action” against any local companies implicated in the scheme. “Our investigation involves coordination between police, customs authorities, and the Malaysian Communications and Multimedia Commission, with active communication established with our Singaporean counterparts,” he told CNBC.
The investigation follows revelations from Singapore’s Law and Home Affairs Minister K Shanmugam, who disclosed that servers from American manufacturers Dell and Supermicro had been delivered to Singapore-based firms before being exported to Malaysia. These servers likely contained components subject to US export restrictions.
Shanmugam indicated the equipment may have contained Nvidia chips, though investigations continue as to whether Malaysia was the final destination or merely another transit point. Singapore has reached out to both Malaysian and US authorities for additional information.
The Malaysian government has emphasised its commitment to upholding export control regulations under its Strategic Trade Act, which governs the movement of strategic goods including sophisticated semiconductors. “We firmly adhere to export control regulations,” Tengku Zafrul stated, adding that Malaysia would not allow any entity to exploit its position as a semiconductor hub for illicit purposes.
To bolster monitoring efforts, Malaysian officials are strengthening international partnerships to track sensitive technologies, particularly Nvidia’s H100 and A100 chips—advanced processors designed for high-performance AI applications. Malaysian policy aligns with control measures implemented by Western powers including the United States, European Union, and United Kingdom.
Wong Siew Hai, president of the Malaysia Semiconductor Industry Association, stressed the importance of compliance with US requirements. “It is crucial for Malaysia to avoid becoming a transit point for AI chips destined for China,” he told CNA, suggesting Malaysia would likely adopt similar preventative measures to those implemented in Singapore.
The controversy has already sent ripples through Malaysia’s electronics sector. Nationgate Holdings Bhd, a listed Malaysian manufacturer that produces for Nvidia, issued a statement categorically denying any involvement in the fraud case after unusual trading patterns in its shares prompted a query from Bursa Malaysia.
American tech firm Nvidia’s advanced AI chips are subject to stringent US export controls aimed at limiting China’s access to cutting-edge technology for strategic purposes. The current investigation was reportedly triggered after Chinese firm DeepSeek released an AI model in January, prompting US authorities to investigate whether sanctions had been circumvented through third parties in countries including Malaysia, Singapore and the United Arab Emirates.
Singapore has already charged three individuals with fraud in connection with the alleged scheme. According to Shanmugam, these individuals are accused of misleading a server supplier regarding the intended end-user of the equipment.
