The administration of former President Donald Trump is preparing new restrictions on the export of artificial intelligence chips to Malaysia and Thailand, in a move aimed at curbing the illicit flow of advanced semiconductors to China.
According to individuals familiar with the matter, the US Commerce Department has drafted a rule that would prohibit the shipment of advanced AI processors—such as those produced by Nvidia Corporation—to the two Southeast Asian nations. The proposal forms part of a broader strategy to block Chinese access to cutting-edge US technology through third-country intermediaries.
Although the regulation remains in draft form and could be revised prior to implementation, sources have indicated that it would be the first formal step in Trump’s promised overhaul of President Joe Biden’s AI diffusion policy. The Biden-era framework, introduced near the end of his term, drew significant criticism from both international allies and leading technology firms, including Nvidia.
The proposed changes will include a formal repeal of the global AI diffusion rule while retaining and reinforcing existing restrictions. Measures targeting China, imposed in 2022 and expanded in 2023 to over 40 jurisdictions, are expected to remain in place. These rules were designed to prevent smuggling and enhance oversight of key markets.
Despite the shift in regulatory approach, insiders suggest that the draft rule is not yet a comprehensive replacement for the previous framework. It notably does not address lingering questions regarding the security protocols surrounding US chip usage in overseas data centres—an issue with significant implications for the Middle East.
It is also unclear whether additional countries could be included under the Trump administration’s revised export controls at a later stage.
The US Commerce Department has not commented publicly on the draft rule. However, Secretary Howard Lutnick told Congress in June that the administration intends to permit AI chip exports to allies, provided the chips are operated by “an approved American data centre operator” and within “an approved American cloud infrastructure”.
Nvidia, the global leader in AI chip manufacturing, declined to comment. Likewise, officials from the Thai and Malaysian governments have yet to respond. Nvidia CEO Jensen Huang has previously stated that there is “no evidence” of AI chip diversion, although his remarks were not directed at any specific country.
Earlier this year, Malaysia’s Ministry of Investment, Trade and Industry stressed the importance of “clear and consistent policies” for the technology sector, while Thai officials said they were awaiting further details on the proposed restrictions.
Washington’s longstanding concern has centred around the possibility that AI chips exported abroad might find their way into Chinese hands, either physically or through remote access to data centres located outside mainland China. Southeast Asia has emerged as a focal point in this regard.
Malaysia, in particular, has seen a surge in semiconductor imports, with major corporations such as Oracle Corporation investing heavily in regional data centre infrastructure. Malaysian authorities have pledged to tighten scrutiny of these shipments under growing pressure from the United States. However, the new rule suggests lingering concerns in Washington.
The spotlight has also turned to Singapore, where prosecutors have charged three individuals in connection with a scheme to deceive clients about the final destination of AI servers. These servers were reportedly shipped from Singapore to Malaysia and may have included advanced Nvidia chips. Nvidia is not implicated in the investigation and has not been accused of wrongdoing.
To mitigate disruptions to businesses operating in the region, the draft regulation is expected to include transitional measures. According to individuals briefed on the plan, companies headquartered in the US or allied nations may be permitted to continue shipments to Malaysia and Thailand without a licence for a limited period following the rule’s publication.
The rule is also likely to retain certain licensing exemptions to prevent supply chain disruptions. Many US semiconductor firms rely on Southeast Asia for critical manufacturing steps, such as chip packaging.
As the global competition over AI intensifies, Washington’s evolving regulatory landscape underscores the balancing act between maintaining technological supremacy and safeguarding strategic interests.
-Bloomberg
