Malaysia is in the U.S. crosshairs. For many months, the Trump administration has suspected that Chinese companies and research centers developing AI have acquired Nvidia’s most advanced GPUs through intermediary companies in Singapore and Malaysia. This scenario is no longer just a hypothesis. The Singaporean government confirmed it had identified those responsible for diverting Nvidia’s high-performance GPUs to China—presumably to DeepSeek’s parent company.
Channel News Asia reported this at the end of February. Singapore’s Minister for Home Affairs and Justice, K. Shanmugam, confirmed the news shortly afterward. Shanmugam didn’t specify which GPUs appeared in the machines but did name the companies that manufactured the servers. Two major U.S. customers of Nvidia—Dell Technologies and Super Micro Computer—appear in the report.
For Malaysia, Antagonizing the U.S. Isn’t an Option
Malaysia is a global powerhouse in cutting-edge integrated circuit packaging and verification. The plants are located in Penang and Kulim, two cities north of Kuala Lumpur. They specialize in processing silicon wafers from Intel factories in Israel and Ireland.
Malaysia attracts both Intel and other U.S. semiconductor manufacturers, as well as chip companies based in China and Taiwan. Its appeal rests on four key pillars: a stable supply chain, strong technological development, highly qualified personnel, and moderate production costs. Countries with these traits present a safe bet for integrated circuit manufacturing.
Many other Chinese integrated circuit manufacturers also divert their chip packaging to Malaysia to shield operations from the uncertainty created by rising U.S.-China tensions.
Intel has operated in Malaysia since 1972, and its infrastructure there has expanded steadily over five decades. Intel’s model has worked so well that other major companies in the semiconductor industry have followed it. One example is the Chinese giant Huatian Technology. Many other Chinese integrated circuit manufacturers also divert their chip packaging to Malaysia to shield operations from the uncertainty created by rising U.S.-China tensions.
The chip industry plays a major role in Malaysia’s economy. The U.S. is a key partner for the country. For this reason, the Malaysian government wants to avoid antagonizing the U.S. administration. Still, the alleged involvement of some Malaysian companies in exporting cutting-edge chips to China puts the country in a delicate position. A Chinese company reportedly trains AI models on Malaysian infrastructure using Nvidia hardware.
Reuters reports that Malaysia’s Ministry of Investment, Trade and Industry is investigating whether this company—or any other firm based in Malaysia—has violated local laws. The ministry is reviewing a report claiming that four Chinese citizens traveled from Beijing to Kuala Lumpur carrying hard drives with dozens of terabytes of spreadsheets and images. Their goal: to train an AI model on 300 servers powered by Nvidia chips.
The U.S. government has not imposed sanctions or restrictions on Malaysia, and the country clearly wants to maintain a cordial relationship with the Trump administration. Still, whether Malaysia will emerge unscathed from this involuntary role as a mediator between China and the U.S. remains to be seen.
Image | Ishan @seefromthesky (Unsplash)
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