Malaysia to tighten semiconductor regulations under US pressure, FT reports

(Reuters) -Malaysia plans to tighten regulations on semiconductors as it comes under U.S. pressure to staunch the flow to China of chips crucial to the development of artificial intelligence, the Financial Times reported on Sunday.

Trade Minister Zafrul Aziz said that the U.S. government was demanding Malaysia closely track the movement of high-end Nvidia ( NVDA ) chips that enter the country over suspicions that many are ending up in China, according to the report.

"[The U.S. is] asking us to make sure that we monitor every shipment that comes to Malaysia when it involves Nvidia ( NVDA ) chips," Aziz told the newspaper.

"They want us to make sure that servers end up in the data centres that they're supposed to and not suddenly move to another ship."

Nvidia ( NVDA ) did not immediately respond to a Reuters request for comment.

The United States is investigating if DeepSeek, whose AI model's performance rocked the tech world in January, has been using banned U.S. chips.

Malaysia is currently investigating if local laws were breached in the shipment of servers linked to a Singapore fraud case, as they may have contained advanced chips subject to U.S. export controls.

Singapore prosecutors told a court earlier in March that the case in which Singapore-based firms have been accused of fraudulently supplying U.S. servers to Malaysia involves transactions worth $390 million.

Singapore media have linked the case to the possible transfer of Nvidia's ( NVDA ) artificial intelligence chips to Chinese artificial intelligence firm DeepSeek.

(Reporting by Rishabh Jaiswal in Bengaluru; Editing by Mrigank Dhaniwala)