The Trump administration is preparing new export controls on advanced AI chips bound for Malaysia and Thailand, aiming to prevent China from acquiring restricted US technologies through third-party countries. The draft regulation, developed by the Commerce Department, follows growing suspicion that banned semiconductors are reaching China via indirect routes.

The proposed rule represents the first formal shift in US AI export policy under Trump, rolling back global restrictions introduced during President Biden’s term while tightening enforcement against Chinese access. Current US policy already restricts the sale of chips like Nvidia’s AI processors to China and over 40 other nations.

Southeast Asia in focus amid chip rerouting fears

Washington's concern centers on the growing AI chip trade with Southeast Asia. Companies like Oracle are expanding data center operations in Malaysia, while export data shows rising chip volumes to the region. A fraud case in Singapore involving AI servers allegedly redirected from Malaysia has also intensified scrutiny, although Nvidia is not implicated.

Authorities suspect that advanced semiconductors are being funneled through Malaysia and Thailand to reach Chinese entities or data centers accessible to them remotely. Despite reassurances from regional governments, US officials are pressing for stricter safeguards.

US allows limited exemptions for allies

To limit disruption, the rule reportedly includes a grace period and exemptions for companies from allied countries. US-headquartered firms and approved partners may continue shipments for several months without a license, while exceptions would protect key semiconductor supply chains, particularly for chip packaging conducted in Southeast Asia.

Policy questions remain unresolved

The regulation does not fully address ongoing debates about how US-made AI chips can be securely used in foreign data centers, particularly in regions like the Middle East. Officials have not ruled out extending restrictions to additional countries in the future.

Commerce Secretary Howard Lutnick previously stated that allies would be allowed to purchase AI chips only if operated through approved US-controlled infrastructure. However, many in the tech industry remain uncertain about the long-term implications of the shifting rules.