Nvidia Chip Flows Under Scrutiny As Malaysia Moves To Tighten Regulations Amid US Export Controls On China

Malaysia plans to strengthen semiconductor regulations following U.S. demands to monitor the movement of high-end NVIDIA Corp. NVDA chips amid suspicions they’re being illicitly diverted to China, violating U.S. export controls.

What Happened: Malaysian Trade Minister Zafrul Aziz told the Financial Times he’s formed a task force with the digital minister to tighten regulations around the country’s growing data center industry, which heavily relies on Nvidia’s powerful graphics processing units.

“[The U.S. is] asking us to make sure that we monitor every shipment that comes to Malaysia when it involves Nvidia chips,” Aziz said. “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.”

The crackdown follows Singapore’s recent arrest of nine people, with three charged in a $390 million fraud case involving the suspected sale of Nvidia chips to China via Malaysia. Prosecutors identified Dell Technologies Inc. DELL and Super Micro Computer Inc. SMCI servers in the fraudulent sales.

Why It Matters: Malaysia has become one of the fastest-growing data center markets, with over $25 billion invested by companies including Nvidia, Microsoft Corp. MSFT, and ByteDance in the southern state of Johor over the past 18 months.

The U.S. implemented export controls in late 2024 creating a three-tier licensing system for AI chips, specifically targeting Nvidia’s powerful GPUs. The restrictions aim to prevent Chinese companies from accessing these chips through third countries for potential military applications.

Aziz acknowledged the complexity of tracking semiconductors through global supply chains. “Enforcement might sound easy, but it’s not,” he said, noting that the U.S. is pressuring companies throughout the supply chain to ensure compliance.

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