The global trade of advanced Artificial Intelligence (AI) chips
is currently undergoing significant transformation due to evolving
U.S. export control policies and the corresponding responses from
international partners. On May 13, 2025, the Trump administration
announced the recission of the Biden-era AI Diffusion Rule,
signaling a pivot towards a more targeted approach to controlling
AI chip exports. This shift aims to prevent the diversion of
cutting-edge semiconductors to adversaries like China through
precise, rather than broad, restrictions.
The evolving U.S. strategy has recently focused on heightened
scrutiny of countries with surging chip shipments and significant
data center infrastructure investments, particularly Malaysia and
Thailand. In fact, reports indicate that the administration is
actively drafting new controls to limit advanced AI chip exports to
both nations, specifically to prevent diversion to China. This new
approach appears geared toward establishing a compliance corridor,
particularly in the Indo-Pacific, by incentivizing U.S. tech
investments only in countries demonstrating strong regulatory
alignment.
Proactive Measures from Key Partners
In response to these measures and broader geopolitical
considerations, key players in the global AI supply chain are
proactively strengthening their own export control
frameworks.
Effective July 14, 2025, Malaysia's Ministry of Investment,
Trade, and Industry mandated a Strategic Trade Permit for all
exports, transshipments, and transits of high-performance
U.S.-origin AI chips. Enacted under the "Catch-All
Control" provision of Malaysia's Strategic Trade Act 2010,
this decisive action aims to close regulatory gaps, prevent illicit
trade, and mitigate the risk of Malaysia being perceived as a
transshipment hub by enhancing supply chain transparency and
oversight.
In addition, India's Directorate General of Foreign Trade
recently mandated robust export control compliance programs for
dual-use items, including AI chips, through new guidelines. These
programs, requiring senior leadership commitment, comprehensive
training, and rigorous risk assessments for export licenses,
underscore India's commitment to controlling critical AI
technology exports.
The proactive stances from Malaysia and India—both
significantly impacted by U.S. AI chip export restrictions due to
their reliance on imports for advanced technologies and ambitious
compute infrastructure objectives—demonstrate a broader
trend: nations fortifying their regulatory environments to enhance
credibility as reliable international AI partners.
Anticipated Trajectory of U.S. Export Controls
The U.S. Department of Commerce is expected to imminently formalize the rescission of the Biden-era AI Diffusion Rule and issue a replacement. While details are pending, the new rule is expected to focus on more narrowly defined categories of AI chips and end-users, reducing compliance burdens on legitimate commercial transactions while still effectively targeting high-risk diversions. The current trajectory suggests a more targeted, strategically focused enforcement posture, emphasizing collaborative efforts with allies and restricting technology access to perceived threats.
Implications for Digital Infrastructure Companies
The evolving U.S. AI chip policy and international partners' regulatory responses create a complex landscape for digital infrastructure companies. Foremost, adapting compliance frameworks to U.S. requirements is paramount, demanding diligent end-use and end-user screening, accurate technology classification, and robust internal compliance programs. Companies should also consider refining supply chain strategies—potentially diversifying manufacturing and sourcing—to navigate distinct partner country requirements, mitigate restrictions, and ensure continuous access to critical components. Overall, rigorous adherence to dynamic U.S. export controls and related AI technology compliance standards will be essential to maintaining operational resilience and global trust.
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