The United States is preparing to tighten its grip on advanced AI semiconductor exports by targeting Southeast Asian nations that may be serving as backdoor channels for Chinese access to restricted technology. The Commerce Department is drafting new regulations that could significantly impact Malaysia and Thailand's role in the global AI chip supply chain.
Addressing Strategic Export Control Gaps
The proposed restrictions represent a direct response to concerns that China has been circumventing existing export controls through creative workarounds. Despite multiple rounds of sanctions aimed at preventing Beijing from accessing high-end NVIDIA processors and other advanced AI chips, Chinese companies have reportedly found alternative pathways. These include renting GPU computing power remotely and establishing procurement networks through Southeast Asian intermediaries, effectively undermining the intended impact of US trade restrictions.
Trump Administration's Policy Shift
The draft regulation marks the first formal step by the Trump administration to replace the Biden-era AI diffusion rule framework. Commerce Secretary Howard Lutnick has outlined a clear policy direction, stating that the US will permit allies to purchase AI chips only when they are operated by approved American data center operators with approved American cloud infrastructure. This approach represents a more centralized control mechanism compared to previous policies, though the current draft is not considered a complete replacement of existing frameworks.
Key Policy Changes
| Aspect | Biden Era | Trump Administration Draft |
|---|---|---|
| Control Mechanism | AI Diffusion Rule | Approved US operator requirement |
| Geographic Scope | Broader global approach | Targeted Southeast Asia focus |
| Implementation | Direct export restrictions | Data center operator controls |
Regional Impact and Industry Concerns
Malaysia has emerged as a particular focus due to its significant role in semiconductor packaging and assembly operations, coupled with substantial data center investments from major technology companies like Oracle. The country has experienced a notable spike in chip imports, raising US concerns about potential smuggling routes. Thailand similarly faces scrutiny as authorities investigate whether legitimate technology infrastructure is being exploited for unauthorized chip transfers to China.
Affected Countries and Their Responses
- Malaysia: Ministry of Investment, Trade and Industry (MITI) emphasizes need for consistent and transparent policies
- Thailand: Government awaiting further details before official response
- China: Already subject to direct AI chip export restrictions since previous rounds of sanctions
Proposed Implementation Framework
The draft regulations include several mechanisms designed to minimize disruption to legitimate business operations while closing perceived loopholes. US-based companies and firms from select allied nations may receive temporary exemptions, allowing continued AI chip shipments to Malaysia and Thailand without licensing requirements for a limited period following implementation. Additional waivers are expected for critical supply chain operations, particularly chip packaging facilities that rely heavily on Southeast Asian manufacturing capabilities.
Temporary Exemptions Under Draft Rule
- US-based technology companies operating in Malaysia and Thailand
- Companies from select allied nations (specific countries not yet disclosed)
- Critical supply chain operations including chip packaging facilities
- Limited time period following implementation (duration not specified)
Market Implications and Future Outlook
NVIDIA has already experienced substantial business reductions in China due to existing export controls, while Chinese alternatives like Huawei's Ascend processors are gaining market traction. The proposed restrictions could further reshape global AI semiconductor distribution patterns, potentially forcing technology companies to restructure their regional operations and supply chains. The scope of restrictions may expand beyond Malaysia and Thailand, though specific details remain under development as the Commerce Department finalizes its approach to balancing national security concerns with economic interests.