KUALA LUMPUR (May 14): Malaysia avoided import limits on data centre powering chips, or graphics processing units (GPU), after the US dropped the artificial intelligence (AI) diffusion rule, but stronger enforcement is needed to become a trusted partner, says an industry leader.
The US has scrapped Biden-era AI chip rules that had limited Malaysia, as a Tier 2 country, to 50,000 GPUs over two years and restricted data centre use to 7% of capacity. The Trump administration may introduce country-specific AI chip rules, though details are pending. The US also confirmed that using Huawei’s Ascend chips worldwide breaks its export rules.
The rule change is good news, said Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai, as removing Malaysia’s Tier 2 status will likely allow more GPU imports. This supports Malaysia’s booming data centre industry, which is set to grow 600% with 1.2 gigawatts of planned development over the next five years.
However, Wong urged the government to ensure local companies follow US rules and prevent Malaysia from being used to re-route advanced chips. He said Malaysia must prove it’s a trusted partner and fix any system loopholes.
Wong said government oversight is needed to ensure AI chips aren't diverted to China. To get Nvidia's approval, suppliers must name their customer and the final user, but Nvidia only monitors the supplier, not where the chips end up.
"Malaysia must prove that it is a trusted country and a trusted country means that you comply with the US restrictions," said Wong.
Kenanga Research in its note on the new development said the statement by the US that use of Huawei Ascend chips violates US export rules, leaves no room for confusion — chip users must choose sides.
It said this move likely aims to help users of US AI tech grow faster while limiting non-US competitors like Huawei. The article supports this by highlighting the US goal of leading in AI innovation.
While Nvidia still dominates the market, Huawei’s Ascend 910C chip is reportedly 60% as powerful as Nvidia’s H100 for AI inference tasks, which are becoming more important with tools like DeepSeek.
"There is probably not much the US can do to completely stop China from growing their AI models given Huawei Ascend chips and so they might want to allow the countries to build out based on their own US tech. One playbook they used is that in 2024 they sold chips to the Middle East on condition they don't buy Chinese [chip]," Kenanga Investment Bank head of research Peter Kong said in his note.
He highlighted data centre-related construction stocks, including Sunway Construction Group Bhd (KL:SUNCON), Sime Darby Property Bhd (KL:SIMEPROP), YTL Power International Bhd (KL:YTLPOWR) and NationGate Holdings Bhd (KL:NATGATE) as beneficiaries of the rule change.
Rakuten Trade’s head of equity sales Vincent Lau told The Edge that SNS Network Technology Bhd (KL:SNS) and CBH Engineering Holding Bhd (KL:CBHB), which are involved in data centre development, stand to benefit from the removal of the import cap.
At market close, the Bursa Malaysia Technology Index, which counts semiconductor stocks as its constituents, gained 2.3%. However, the index has fallen 17.08% year-to-date.