High-stakes chip war

Nvidia AI chip. — Reuters

THE US government’s move to further restrict advanced chips such as Nvidia’s Blackwell processors from being acquired by subsidiaries of Chinese businesses operating overseas will have implications for South-East Asia, where countries like Singapore, Malaysia and Thailand are vying to be the region’s data centre (DC) hubs.

Last weekend, Reuters reported that the US government issued unexpected guidance notifying that it will start enforcing licensing requirements for advanced chips for entities headquartered in China that have operations outside the country.

These requirements are not new and have been in place since 2023, with access to these chips a point of contention in the US-China trade war.

The enforcement comes in the wake of the US government closing a loophole exploited by non-US businesses, particularly Chinese businesses operating outside China, to buy these advanced chips without a licence. These chips, housed in DCs, are prized for their computing power, especially in generative artificial intelligence (AI).

Malaysia is home to a number of hyperscale DCs owned by Chinese companies such as Alibaba and GDS, but the picture is more complicated due to the interlinked supply chains in which even DCs not owned or operated by Chinese entities may still have Chinese involvement.

Also, many Chinese businesses use DCs in the region to store data and other AI-powered cloud computing applications.

As the technology race between the United States and China becomes ever more contentious, several actions have been taken, including a case involving Singapore-based Megaspeed International Pte Ltd, a company that was split off 7Road Holdings Ltd, which has ties to Beijing.

Megaspeed’s Malaysian subsidiary was used to purchase US$2bil worth of advanced Nvidia chips for use in DCs in Malaysia and Indonesia serving Chinese businesses, with investigations ongoing over whether these chips were also being illegally shipped to China.