Malaysia announced yesterday that all exports, transshipment and transit of high-performance AI chips of US origin are subject to a Strategic Trade Permit with immediate effect. In a press release published on its website, the Ministry of Investment, Trade and Industry (MITI) said Section 12 of the Strategic Trade Act 2010 (STA 2010), a catch-all provision, requires individuals or companies to notify the relevant authority at least 30 days before exporting, transhipping, or bringing in transit any item not expressly listed in the Strategic Items List (SIL). This would apply if the individual or company knows or have reasonable grounds to suspect the item will be misused, or used for a restricted activity.
According to the ministry, the initiative serves to close regulatory gaps while Malaysia undertakes further review on the inclusion of high-performance AI chips of US origin into the SIL of the STA 2010.
“Malaysia stands firm against any attempt to circumvent export controls or engage in illicit trade activities by any individual or company, who will face strict legal action if found violating the STA 2010 or related laws,” it said.
The statement added that while Malaysia supports investments and trade aligned with international best practices as well as with multilaterally agreed commitments, all entities operating in the country are expected to comply with relevant international obligations that are applicable to their operations to avoid any secondary sanctions on their businesses.
“MITI remains committed to preserving a safe, secure, transparent, and rules-based trading environment with all its trade partners, and will not tolerate the misuse of Malaysia’s jurisdiction for illicit trading activities,” it said.
The ministry did not immediately respond to press questions.
Initial remarks by people in the industry indicated that this is a step in the right direction to placate Washington amid several highly publicised allegations of illegal transhipments of US-made AI chips through intermediaries in the country to places like China. Despite findings by Malaysia that “there is no evidence such shipments occurred” and a statement by Nvidia’s CEO Jensen Huang that there is “no evidence” of AI chip diversion (without referring to any specific country), the perception is that Malaysia, a burgeoning data center hub is harbouring such ‘illegal activities’ in the eyes of the US. Washington has effectively banned the sale of advanced AI chips to China since 2022.
Some observers believed this is part of the concession on Malaysia’s part while hammering out a deal in tariff talks with the US ahead of the 1 August deadline when Malaysia gets hit with 25% tariffs for some exports to the US.
Barely two weeks ago, Bloomberg reported that the US was mulling new GPU controls targeting Malaysia and Thailand. In recent months, American companies like Oracle have massively expanded their data center footprint in Malaysia. This is accompanied by increased imports of AI components.
Malaysia is now considered a top hub for AI data centres in ASEAN and is a key part of the AI supply chain.