Post by : Meena Ariff

Photo: Reuters

The United States government is getting ready to make a strict new rule that will stop companies like Nvidia from sending their special AI computer chips to Malaysia and Thailand. This decision has come after US officials found out that China is still getting these powerful AI chips through these two countries, even though the US banned selling these chips directly to China long ago.

Why is the US Worried About China Getting AI Chips?

For many years, the US has been worried about China’s fast-growing technological strength, especially in artificial intelligence (AI). These AI chips are not just used in making apps and websites smarter but can also be used for advanced military technology, spy systems, and powerful weapons. Because of these security fears, in 2022, the US banned the sale of these high-tech chips directly to China.

Then in 2023, the US made the rules even stricter because it believed some companies were finding ways to send these chips to China secretly, breaking the export rules. Despite these strong controls, China was still getting these chips by buying them from other countries, including Malaysia and Thailand.

How is China Getting These Chips Through Other Countries?

What is happening now is that Malaysia and Thailand buy these AI chips from the US, and then some companies there sell them again to China. The US believes that sometimes these countries may not know that the chips are being sent to China, but other times, it may be done knowingly for business profits.

This has made US officials feel that just banning direct sales to China is not enough. They want to stop China from getting these AI chips through any back-door routes, and that is why they are planning this new rule.

What Does the New Rule Say?

The US Commerce Department has prepared a draft rule to stop the shipment of AI chips to Malaysia and Thailand. This draft rule is part of President Donald Trump’s plan to make AI export rules even stronger and tighter than before.

This new rule will:

Continue the strict bans on China and over 40 other countries that were already blocked from getting these AI chips because of security risks.

Replace some parts of President Joe Biden’s old AI diffusion rule, which had put global limits on selling AI chips but was criticised by many US allies and big tech companies. They wanted more freedom to trade and grow their businesses without too many restrictions.

Does This New Rule Solve All Problems?

No, this rule does not cover everything. For example, it does not solve the problem of how safe the US-made chips are when they are used in other countries’ data centres, especially if those data centres are not controlled by American companies. There are fears that China could still find ways to remotely access these chips and use them for its own purposes.

What Did The Commerce Secretary Say?

Howard Lutnick, the US Commerce Secretary, said that the US will still allow its allies to buy AI chips, but they must follow strict conditions. These chips must be used only in data centres that are operated by approved American companies, and the cloud systems connected to these centres should also be run by trusted US companies.

This way, the US can keep an eye on how its powerful technology is being used and stop it from reaching countries like China, which it sees as a security threat.

What Are Nvidia, Malaysia, and Thailand Saying About This?

Nvidia, which makes most of the world’s AI chips, has not given any comment about this decision yet. Also, the governments of Malaysia and Thailand have not replied to questions about what they think of this plan. But it is expected that they might raise concerns because these rules will affect their trade and technology sectors.

Why is Southeast Asia So Important for AI Chips?

Southeast Asia, especially Malaysia, has become a major hub for AI chip trade and use. Big companies like Oracle are investing a lot of money in building large data centres in Malaysia.

Recent trade data shows that chip shipments to Malaysia have increased a lot in the last few months, even though Malaysian officials have promised the US that they will check all imports carefully to make sure no chips are reaching China secretly.

What Happened in Singapore’s Court Case?

In Singapore, three men have been charged in court for lying to customers about where AI servers containing Nvidia chips were really going. They told customers that these servers were being sent to safe countries, but in reality, they were being sent somewhere else, possibly to China.

This shows how difficult it is for the US to track where these chips end up after leaving American factories.

How Will This New Rule Affect Companies?

The US knows that many companies have their factories, suppliers, and operations in Southeast Asia. If they suddenly stop all exports to Malaysia and Thailand, it could hurt businesses badly and disturb the global supply chain.

To avoid this, the new rule will give companies some time to adjust. For a few months after the rule is announced, companies from the US and friendly countries can continue sending AI chips to Malaysia and Thailand without needing special licenses. This grace period will help them prepare for the changes and make new plans.

However, after this time, companies will need special licences to export these chips. There will still be some exceptions to these rules so that semiconductor companies can continue important work like packaging chips for use in laptops, phones, and other electronic devices without too many problems.

Why is This Decision Important?

This decision shows how serious the US is about protecting its advanced technology from reaching countries it sees as threats. At the same time, it also wants to protect its own businesses from losing profits and jobs because of sudden changes in trade rules.

By putting strict rules on AI chip exports to Malaysia and Thailand, the US hopes it can stop China from using these chips in ways that could harm America’s security or economy and still keep its own technology companies strong in the global market.