Malaysia committed to export controls, denies AI chip smuggling claims to China

KUALA LUMPUR: The Malaysian government takes seriously the allegation that the country is being used as a transit point for smuggling Nvidia artificial intelligence (AI) chips to China and is committed to complying with multilateral international export control regulations.

Minister of Investment, Trade and Industry Datuk Seri Tengku Zafrul Abdul Aziz said that Malaysia does not want any party to exploit its position as a semiconductor and regional logistics hub for illegal activities.

“We firmly adhere to export control regulations under the Strategic Trade Act, which governs the export, transit, and transhipment of strategic goods, including semiconductors.

“Malaysia’s policy aligns with control measures implemented by the United States (US), the European Union (EU), and the United Kingdom,” he said during an interview on the Bernama TV’s Ruang Bicara Aspirasi Ekonomi programme on Wednesday.

To strengthen oversight, he said the government is enhancing international cooperation to monitor the flow of sensitive technologies, such as Nvidia’s H100 and A100 chips used in high-performance AI applications.

In other developments, the Chinese technology firm DeepSeek has gained global attention after announcing a third-generation AI model that operates with lower computing power than Nvidia chips, with a total expenditure of under US$6 million (RM27 million).

Tengku Zafrul said that the success of DeepSeek proves that AI technology is no longer monopolised by a few countries or large companies like Microsoft, OpenAI, or Google.

“We are now seeing China, Alibaba, and perhaps soon India or the EU competing in AI technology.

“Technological advancements like DeepSeek have a positive impact, making AI more inclusive and accessible to more users. If AI can operate at a lower cost, more businesses, including small and medium enterprises (SMEs), can leverage it to boost productivity,” he explained.

He added that AI models that rely less on high-powered graphics processing units could also reduce energy consumption, making AI technology more sustainable.

Malaysia needs to strengthen R&D and technology investment

Tengku Zafrul emphasised that the success of AI technology in China and other countries should serve as a lesson for Malaysia.

“If we only focus on producing skilled labour but neglect research and development (R&D), we will fall behind. The government has introduced the New Industrial Plan to enhance the value chain in the semiconductor and AI industries,” he said.

He shared that Malaysia is now prioritising the development of integrated circuit (IC) design and wafer manufacturing, areas that remain underexplored by local companies.

“Although Malaysia has been in the semiconductor industry for 50 years, most companies still focus on assembly and testing (back-end) activities. Therefore, the government is providing incentives and R&D grants to encourage investment in high-value technology.

“We must transition from merely being a production centre to becoming a leader in innovation and technology development,” he said.

Tengku Zafrul reiterated that the Ministry of Investment, Trade and Industry (Miti) remains committed to ensuring that the benefits of AI technology extend to SMEs and the local workforce.

He stressed that the government aims to create economic spillover effects not only for large corporations but also for SMEs as well as micro-enterprises.

“A key concern is the issue of ‘brain drain. Many of our skilled professionals are migrating to Singapore, the US, China, and Taiwan due to limited job opportunities in Malaysia’s high-tech sectors.

“To address this, Miti is working to attract more technology companies that can offer high-quality jobs to Malaysians. We do not want to be just a country that provides labour, but also a leader in innovation and technology,” he said.

Tengku Zafrul added that Malaysia will continue reviewing its policies to remain competitive in the rapidly evolving AI and digital technology industries.

-- BERNAMA

Read the latest news here