Malaysia is preparing to tighten its oversight of semiconductor exports, particularly shipments of high-end Nvidia AI chips, in response to U.S. pressure to prevent illicit flows to China. Trade Minister Zafrul Aziz said the U.S. has asked Malaysia to ensure chips only reach approved data centres, in line with Washington’s broader export controls aimed at restricting China’s access to advanced technology.

The move follows rising concerns over illegal rerouting of chips, highlighted by a recent $390 million fraud case in Singapore involving Nvidia chips believed to have passed through Malaysia. As a growing data centre hub attracting over $25 billion in investments from tech giants like Nvidia and Microsoft, Malaysia has formed a task force to improve regulation, led by Digital Minister Gobind Singh Deo.

Zafrul acknowledged the challenges of enforcement, citing the complexity of global supply chains, but noted that the U.S. is also pressing its own firms to tighten compliance with export restrictions.