Malaysia’s semiconductor industry is responding to claims that the country has been used as a transit point for banned artificial intelligence (AI) chips to China. These claims follow a Reuters report indicating that the U.S. Department of Commerce is investigating whether China-based DeepSeek had accessed restricted Nvidia H100 chips through intermediaries in Malaysia and Singapore, amid concerns over organized smuggling networks circumventing export controls.
Wong Siew Hai, president of the Malaysia Semiconductor Industry Association, rejected the allegations, emphasizing that strict safeguards are in place within the country’s semiconductor sector. Wong explained to BenarNews that Nvidia GPU chips, used for AI servers, are only sold to approved vendors. He further noted that even legally purchased chips must be vetted by Nvidia before being used to assemble AI servers for data centers.
Wong also questioned the premise behind the U.S. concerns, stating, “Everything is accounted for. So, if the U.S. thinks there is some leak from Malaysia, we don’t know how it is done.”
DeepSeek, a Chinese AI startup based in Hangzhou, gained attention last month after claiming that its AI model, DeepSeek R1, could compete with OpenAI’s ChatGPT at a fraction of the cost. This announcement led to significant declines in tech shares, including a drop in the Nasdaq and European Nasdaq futures.
A Nvidia spokesperson declined to confirm whether its export-controlled chips were involved in DeepSeek’s operations but reiterated the company’s commitment to ensuring that its partners comply with all applicable laws.
Both DeepSeek and U.S. commerce officials have not responded to requests for comment.
In light of these developments, Malaysian Prime Minister Anwar Ibrahim has stressed the importance of balancing relations with both Washington and Beijing. He highlighted that electrical and electronics exports, including chips, account for a significant portion of Malaysia’s exports to the U.S., adding that the country adheres to global trade rules and does not violate any United Nations sanctions.
Prime Minister Anwar reaffirmed Malaysia’s commitment to maintaining strong relations with the U.S. while managing its closer ties with China. He noted that Malaysia will avoid making drastic moves in uncertain geopolitical and trade policy environments.
Tengku Zafrul Abdul Aziz, Malaysia’s Minister of Trade and Industry, also weighed in, noting that AI models like DeepSeek could help boost demand for Malaysia’s data centers and position the country as a neutral AI hub for both Western and Chinese companies.
Mark Minevich, an AI industry analyst based in Washington, raised concerns about DeepSeek’s computational capabilities, suggesting that the company may have integrated restricted hardware into its AI infrastructure. He warned that any confirmation of this could prompt the U.S. to intensify enforcement measures against entities facilitating unauthorized chip transfers to China.
As Malaysia continues to navigate its position in the global semiconductor and AI industries, experts like Asrul Hadi Abdullah Sani, a partner at ADA Southeast Asia, caution that the country must balance welcoming Chinese investments while avoiding U.S. sanctions. Malaysia has previously faced pressure from Washington over similar allegations involving Iran and may face increased scrutiny due to China’s significant investments in local data centers and 5G infrastructure.
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