US government restricts advanced AI-chip exports to Malaysia and Thailand to prevent diversion to China.
President Trump's administration plans to restrict shipments of advanced AI chips from Nvidia Corp. to Malaysia and Thailand in an effort to prevent China from obtaining these components through intermediaries in Southeast Asia. A draft rule from the Commerce Department seeks to block China — to which the U.S. has effectively banned sales of Nvidia's advanced AI processors — from obtaining those components through the two Southeast Asian nations, though the rule is not yet finalized and could still change. Officials plan to pair the Malaysia and Thailand controls with a formal rescission of global curbs from the so-called AI diffusion rule established at the end of President Biden's term, which had drawn objections from U.S. allies and tech companies, including Nvidia. Washington would maintain semiconductor restrictions targeting China that were imposed in 2022 and ramped up several times since, as well as more than 40 other countries covered by a 2023 measure designed to address smuggling concerns and increase visibility into key markets.
The regulation marks the first formal step in Trump's promised overhaul of his predecessor's AI diffusion approach, following the Commerce Department's statement in May that it would supplant the Biden rule with its own "bold, inclusive strategy." Commerce Secretary Howard Lutnick told lawmakers that the U.S. will "allow our allies to buy AI chips, provided they're run by an approved American data center operator, and the cloud that touches that data center is an approved American operator." However, the draft measure remains far from comprehensive, leaving unclear questions about security conditions for U.S. chips used in overseas data centers — particularly in the Middle East — and whether Trump officials may ultimately regulate AI chip shipments to a wider swath of countries beyond Malaysia and Thailand.
The focus on Southeast Asia reflects mounting concerns over semiconductor diversion. Trade data show that chip shipments to Malaysia have surged in recent months, with companies including Oracle Corp. investing aggressively in Malaysian data centers. A court case in neighboring Singapore underscores these concerns: prosecutors have charged three men with defrauding customers about the ultimate destination of AI servers originally shipped from Singapore to Malaysia that may have contained advanced Nvidia chips. (Nvidia is not the subject of Singapore's investigation and has not been accused of any wrongdoing.)
Washington officials have debated for years which countries should import American AI chips and under what conditions. While policymakers want the world to build AI systems using American technology before China can offer a compelling alternative, they worry that once semiconductors leave American and allied shores, the chips could reach China or that Chinese AI companies could benefit from remote access to overseas data centers. The export curbs on Malaysia and Thailand would include provisions easing pressure on affected companies: firms with U.S. headquarters and a few dozen friendly nations would be permitted to continue shipping AI chips to both countries without seeking a license for a few months after publication, and exemptions would remain to prevent supply chain disruptions, particularly for Southeast Asian facilities crucial to manufacturing steps like chip packaging.