July 4, 2025- The United States is preparing to impose new export restrictions on the shipments of advanced artificial intelligence (AI) chips to Malaysia and Thailand, aiming to prevent the Unauthorized rerouting of sensitive technologies to China via Southeast Asia.
The proposed rule is currently under review by the U.S. Commerce Department. The elite chipmakers like Nvidia and AMD would be required to have a special export license before shipping their most powerful GPUs, including the A100 and H100, to data center operators in Malaysia and Thailand.
The policy shift follows mounting evidence that Chinese firms are using third-party countries to access restricted chips, bypassing existing U.S. controls.
U.S. officials are especially concerned about what they describe as a growing “AI gray market” in Southeast Asia.
According to investigations reported by The Wall Street Journal, Chinese engineers have been physically transporting high-capacity hard drives filled with training data to Malaysia, renting GPU time in regional data centers, and flying the processed data back to China, effectively dodging export controls.
Malaysia, in particular, has seen a dramatic increase in AI chip imports. Reports indicate that imports of U.S. GPUs into the country surged by more than 3,400% in the first half of 2025. Thailand has also emerged as a transshipment point, raising alarms in Washington over the lack of end-use controls and audit mechanisms in the region.
The planned restrictions come just weeks after the U.S. rescinded the so-called “AI Diffusion Rule,” introduced under the Biden administration. That rule had broadly limited AI chip exports to all but a narrow set of “Tier 1” countries, but critics within the U.S. government argued it was overly rigid and hard to enforce. In its place, the Commerce Department under the Trump administration is pursuing a more targeted approach focused on specific jurisdictions and known diversion pathways.
In announcing the policy reversal, Commerce Undersecretary Jeffrey Kessler stated,
"The Trump Administration will pursue a bold, inclusive strategy to American AI technology with trusted foreign countries around the world, while keeping the technology out of the hands of our adversaries. At the same time, we reject the Biden Administration’s attempt to impose its own ill-conceived and counterproductive AI policies on the American people.” in a press briefing.
Malaysia has responded quickly to international scrutiny. In a statement issued on June 18, the Ministry of Investment, Trade and Industry (MITI) said it has “zero tolerance for breaking Malaysian laws” and is actively coordinating with the Digital Ministry to trace data center activities and enforce compliance. Trade Minister Tengku Zafrul Aziz reaffirmed Malaysia’s commitment to international semiconductor standards, noting that a dedicated task force, formed in coordination with the Digital Ministry, has been established to investigate any potential violations. He said,
“Currently, we have commenced an investigation together with relevant agencies including the Royal Malaysia Police (PDRM), Royal Malaysian Customs Department (JKDM), Malaysian Communications and Multimedia Commission (MCMC), and parties from the United States (US), At the moment, there are no findings or reports indicating that the matter actually exists”,
Thailand has yet to issue an official response but is reportedly reassessing its export-monitoring protocols and may align with Malaysia’s approach if the U.S. regulations are finalized in the coming months. Industry analysts note that both countries must navigate a delicate balance: preserving their appeal as regional technology hubs while avoiding potential geopolitical fallout or trade repercussions.
Thailand’s Finance Minister, Pichai Chunhavajira, briefed, “Thailand is aiming to establish a fair trade and investment relationship with the United States, preventing transshipment violations.”
Chinese state media have strongly condemned the U.S. strategy. A commentary by Ruan Jiaqi, columnist at Guancha.cn accused Washington of “coercing other nations into joining its anti-China tech blockade,” warning that such moves risk fracturing the global semiconductor supply chain.
“Washington’s evil intention of targeting China has not ended. The US maintains not only chip restrictions targeting China, imposed in 2022 and ramped up several times since then, but also a 2023 measure unveiled by Biden officials designed to address smuggling concerns and increase visibility into key markets.”
The core concern for U.S. regulators is the growing sophistication of workaround methods. As documented by The Wall Street Journal, Chinese startups and academic institutions are increasingly turning to offshore compute power, whether by renting GPU time or establishing proxy companies, to continue developing large language models and AI training pipelines.
The Commerce Department’s revised strategy includes provisions for fast-track exemptions. Trusted multinational operators running U.S.-controlled cloud infrastructure in Southeast Asia may still receive shipments, provided they meet strict reporting and audit requirements. These measures reflect a shift from country-level classifications toward company-level trust models, allowing some degree of trade continuity while blocking unauthorized rerouting.
A spokesperson for the U.S. Commerce Department said in a statement when asked about potential license revocations
“Chipmakers will still be able to operate in China. The new enforcement mechanisms on chips mirror licensing requirements that apply to other semiconductor companies that export to China and ensure the United States has an equal and reciprocal process.”
The new rules are expected to be released for public comment later this quarter, with implementation likely before the end of 2025. U.S. semiconductor companies have already been briefed on potential compliance changes and may soon be required to strengthen due diligence when engaging with customers in intermediary markets.
With escalating geopolitical tensions over semiconductors, Southeast Asia’s AI chip market is emerging as a key battleground in the broader U.S.-China tech rivalry. What was once seen as a neutral manufacturing zone is now emerging as a contested corridor, compelling governments and companies to redefine the boundaries of trust, trade, and technological sovereignty.
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