STRENGTHENING SEMICONDUCTOR REGULATIONS SENDS POSITIVE MESSAGE TO GLOBAL MARKET – MSIA

By Anas Abu Hassan

KUALA LUMPUR, March 25 (Bernama) -- Malaysia’s commitment to tightening regulations on semiconductors sends a positive message to the global market, especially the United States (US), as it demonstrates the country’s seriousness in addressing security concerns.

Malaysia Semiconductor Industry Association (MSIA) president Datuk Wong Siew Hai said that by strengthening regulations within the industry, the government can ensure that there are no loopholes for any parties to perform suspicious activities.

On Monday, Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz was quoted in a report as saying that the government is planning to strengthen its regulation on the semiconductor sector in response to US pressure to prevent the unauthorised flow of advanced artificial intelligence (AI) chips to China.

“Based on recent authorities' investigation on the suspicion of unauthorised transfer of advanced AI chips to China via our country, there was no evidence found.

“So the only way is to tighten regulations to ensure we put in place a control measure that will address the loophole in our system,” he told Bernama.

According to a Financial Times report, Tengku Zafrul said the US government has asked Malaysia to closely track the movement of high-end Nvidia chips into the country amid suspicions that the chips are diverted to China, hence violating US export rules.

This came after Singapore's authorities charged three men over the alleged fraudulent movement of Nvidia chips earlier this month and its Law and Home Affairs Minister K Shanmugam said the servers in the fraud case may have contained Nvidia’s chips which were then sent to Malaysia.

Meanwhile, Public Investment Bank Bhd (PIVB) opined that the move to strengthen the flow of Nvidia's chip could potentially have a negative impact on the AI server dealers and AI server assemblers in Malaysia.

“The deliveries would slow down subject to authority scrutinisation,” it said.

Impact from US export policy, tariff

Nevertheless, it is believed that the US chip export quota has muted impact for most of hyperscale data centre players in Malaysia.

In January 2025, the Department of Commerce’s Bureau of Industry and Security published an Interim Final Rule, which allows US cloud service providers to deploy only 50 per cent of their total AI computing power outside the US.

Malaysia has been classified as a Tier-2 country, permitted to import only 50,000 graphics processing units (GPUs) over two years, with data centre operators restricted to deploying a maximum of seven per cent of their computing capacity in any single Tier-2 nation.

According to Wong, MSIA has been trying to engage with personnel responsible for the tier system in the US Embassy in Kuala Lumpur to have a dialogue to find out how and why Malaysia is classified as a Tier-2 country.

“Right now we need to understand what criteria they are using to classify us in order for us to see how we can improve and move out of Tier-2 status,” he said.

However, PIVB noted that there is another concern over the potential US chip tariffs on semiconductors after US president Donald Trump said in February that he planned to impose tariffs on semiconductors at a rate of 25 per cent or higher though it is unclear when this decision could be made.

“In this context, we think there should not be a significant impact on the Malaysian technology sector as a whole given that there are only a handful of foundries in Malaysia and only two players have dealings with the US markets.

“The rest are mostly involved within the assembly, testing and packaging space, which is part of the manufacturing process,” it said.

-- BERNAMA