Malaysia Under US Pressure to Monitor Nvidia Shipments as Washington Eyes China Backdoor Routes

Key Takeaways

• Malaysia is facing pressure from the U.S. to tighten its watch on Nvidia chips passing through the country.
• Increased regional illicit trade has raised concerns about Nvidia chips entering China.
• The U.S. is actively monitoring and increasing tariffs on Chinese imports.

Malaysia is reportedly under pressure to enforce stricter restrictions on the transit of Nvidia’s semiconductors after the U.S. urged the country to monitor whether the chips are entering China.

Concerns over illegal chip trading in the region have grown. In February, three men in Singapore were charged for allegedly selling millions of Nvidia chips sourced from Malaysia to China.

Malaysia Under Pressure

Investment, Trade and Industry Minister Zafrul Abdul Aziz told the Financial Times that the White House asked Malaysia to monitor imports and exports of Nvidia chips in the country.

“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,” he told the publication.

Abdul also confirmed the country was forming a task force to tighten regulations surrounding its growing data center industry, which also heavily relies on Nvidia’s chips.

Over the past few years, the U.S. has imposed strict export controls on advanced equipment to disrupt Chinese advancements in AI and other emerging technologies.

Illicit Trade

Suspicions are increasing in Washington that China is still receiving AI chips from America’s leading AI firms.

Nvidia, one of the world’s most valuable companies, has almost a quarter of its sales from its Singapore office, which has raised concerns that some were heading to China.

The chipmaker claims that almost all of these sales are invoiced from international companies, with most of the chips not entering the country.

In February, Singapore charged three men for allegedly selling $390 million worth of Nvidia chips to China, all of which were supplied from Malaysia.

The fraudulent sales also included Supermicro and Dell servers, which are also on the banned exports list.

Chinese Firms Sidestepping Controls

In August 2024, Reuters revealed that State-linked Chinese entities were using U.S. cloud service providers to access banned American AI chips.

The publication found that at least 11 Chinese entities attempted to obtain access to U.S. technologies through cloud service providers, including Amazon Web Services (AWS).

In a document viewed by Reuters, Shenzhen University was revealed to have spent 200,000 yuan ($28,000) on an AWS account to access Nvidia A100 and H100-powered cloud servers.

In a statement to CCN, an Amazon spokesperson said: “AWS complies with all applicable US laws, including trade laws, regarding the provision of AWS services inside and outside of China.”