The U.S. Commerce Department is weighing new measures to stop the flow of AI chips to China through Southeast Asia. The proposal, part of the ‘AI Diffusion’ policy, targets countries like Malaysia and Thailand, which have become major backdoors for NVIDIA’s high-end AI chips.
These chips, critical for China’s AI ambitions, have been flowing to Beijing through local AI firms in Southeast Asia, exploiting loopholes that circumvent U.S. export restrictions. Despite several rounds of export bans, U.S. authorities have struggled to block this indirect access to cutting-edge technology.
With concerns growing over the strategic implications, the Commerce Department is drafting new restrictions aimed at curbing this workaround. Bloomberg reported that these measures could severely limit access to AI chips in countries like Malaysia and Thailand, though details are still being finalized. The policy proposal includes potential restrictions that would allow AI chip exports only to companies with U.S. headquarters and subsidiaries operating in these nations. The scope of these controls remains unclear, as large American companies, such as Oracle, also operate significant data centers in these countries.
Commerce Secretary Howard Lutnick emphasized the administration’s stance on AI export controls: the U.S. will permit its allies to acquire AI chips, but only if the chips are used in data centers owned or operated by U.S.-approved entities. For companies like NVIDIA, the situation is complex. Although their business in China has shrunk drastically, China’s domestic alternatives, such as Huawei’s Ascend chips, are gaining traction, which could shift the global AI balance. It remains to be seen how this dynamic will affect both the U.S. and China in the long term.
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