US Considers AI Chip Export Restrictions on Malaysia and Thailand to Prevent China Access

US Plans AI Chip Curbs on Malaysia, Thailand Over China Concerns

President Donald Trump's administration plans to restrict shipments of AI chips from the likes of Nvidia Corp. to Malaysia and Thailand, part of an effort to crack down on suspected semiconductor smuggling into China. A draft rule from the Commerce Department seeks to prevent China -- to which the US has effectively banned sales of Nvidia's advanced AI processors -- from obtaining those components through intermediaries in the two Southeast Asian nations, according to people familiar with the matter. The rule is not yet finalized and could still change, said the people, who requested anonymity to discuss private conversations.

The U.S. Is Considering AI Chip Restrictions on Malaysia and Thailand, Aiming to Patch Trade Loopholes That Funnel Chips to China

The US Commerce Department is looking into measures that would stop the flow of AI chips to China from Southeast Asia, and will reportedly implement them in the "AI Diffusion" policy. The flow of NVIDIA's high-end AI chips to China is a big issue for the U.S., and despite several occasions of export controls, the administration has been unable to restrict Beijing from utilizing top-end accelerators. While the direct flow of equipment to mainland China has decreased significantly, local AI firms have sought out many "loopholes" such as renting GPUs or accessing them through Southeast Asian nations like Malaysia. And now, it seems like the Commerce Department looks determined to patch these loopholes, as reported by Bloomberg. It is claimed that the Commerce Department is preparing a draft for China to see restrictions on accessing AI chips through backdoors in Malaysia and Thailand. While nothing is final for now, it is claimed that restrictions can be imposed on both countries; however, there's still confusion on the scope of the export controls, since many of the Big Tech organizations like Oracle have their data centers in the region. One proposition includes allowing AI chip exports to these nations only if they are utilized by those companies that have headquarters in the U.S. and are operating subsidiaries in Malaysia and Thailand. The U.S. administration is still formalizing on how to frame the Biden-era "AI Diffusion" rule, and according to Commerce Secretary Howard Lutnick, here is what America's core policy is going to be with export controls: The US 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. As far as NVIDIA is concerned, Team Green is totally clueless about how the Trump administration would frame its AI policies, but the company has seen a massive reduction in business in China. On top of that, China's own AI chip alternatives like Huawei's Ascend are gaining momentum when it comes to adoption, which indicates that the global AI balance is indeed evolving pretty quickly. It would be interesting to see how the situation turns out for the US and China.