The United States artificial intelligence (AI) chip export curbs has limited impacts on Malaysia’s technology space, Malaysian analysts said Friday.

RHB Investment Bank Research said in a note that it believes the direct impact from US AI chip export curbs on Malaysian technology firms is limited.

“While the indirect impact is difficult to ascertain, we note that local tech supply chains are insignificant in the global AI supply chain,

“We remain optimistic of a stronger 2025 on the back of a sector recovery, fueled by firmer broad-based demand and the replacement cycle,” said the research house.

The US is planning further restrictions on exports of AI chips, as it aims to curb the use of these chips in data centers (DCs) globally, targeting both countries and companies.

Under the new restriction, US-based firms can apply for blanket permission to ship chips to DCs in most parts of the world, provided that no more than a quarter of their total computing power is located outside of Tier 1 countries, and no more than 7 percent in any one Tier 2 country.

The vast majority of countries, including Malaysia, fall into the second tier of restrictions, which establishes
maximum levels of computing power to a single nation is equivalent to about 50,000 graphic processing unit (GPU), from 2025 to 2027.

Individual companies can access significantly higher limits if they apply for the validated end-user (VEU) status in each country and adhere to the rules and standards.

According to RHB, if the restriction comes into effect, it will likely affect DC expansion plans, especially outside Tier 1 countries including Malaysia.

However, it understands that most of the new AI DCs in Malaysia are US-owned.

Also, the 1.4GW capacity that is live (not all are AI DCs), under construction, or committed is well under the 7% threshold of the current 20.4GW DC size in the US alone (not including other Tier 1 countries), while the new 2.8GW capacity is still in the early stages.

Hence, the research house believes the impact will be more evident for Chinese DC developers/offtakers dealing with more advanced AI chips.

According to RHB, the new restriction could affect supply chains that are in the ecosystem of GPU and central processing unit (CPU) servers.

While believing only a few local companies are directly affected, it noted some technology companies in Malaysia could be directly affected given their businesses in the AI-server/switches assembly businesses.

Potential indirect impact on other outsourced semiconductor assembly and test (OSAT) players in Malaysia, however, will be fairly minimal, limited to their exposure to certain power management chips used in the server/industrial segment due to potential slower output for servers, it noted.

However, it said the potential curbing of AI-related chip exports, a major growth driver for the current semiconductor upcycle, could lead to a sector-wide slowdown,
affecting the entire supply chain.

It noted Malaysian companies which produce semiconductor equipment, and support the largest fab, could see slower sales.

It also said engineering support players to front-end equipment manufacturers may also face slower demand.

Meanwhile, TA Securities said in a note that it is neutral on this development, as it believes the proposed regulation is unlikely to significantly impact Malaysia’s semiconductor sector at the moment, given that the sector has yet to develop substantial direct exposure to American AI chips.

According to the research house, vast majority of countries, including Malaysia, will likely fall into the second tier of
restrictions.

It opined that this tier would face limits on AI chip imports, though higher caps could be granted if they comply to certain U.S. standards.

“Overall, we remain optimistic about the prospects of the semiconductor sector in Malaysia, underpinned by decent growth in global semiconductor sales,” TA said.

Additionally, it noted the increasing trade tensions between the US and China could create more trade diversion opportunities for Malaysia under the China Plus One strategy.

Furthermore, it opined that the continued implementation of the National Semiconductor Strategy will help local players move up the value chain in the global semiconductor industry.

While the new rules additionally limit the export of closed AI model weights (computation power), Kenanga Research opined that this may be overcome if entities obtain validated end-user (VEU) status which comply with US security standards.

Thus once this condition is satisfied, the research house does not see impediments to the AI business operations and AI server assembly business operations in Malaysia.

“While there are country level quotas on chips for Tier 2 countries that suggest a ‘ceiling’ where the chips ultimately end up, there shouldn’t be restriction to sales if their end-buyers comply with VEU status,” it said.

CIted the Consumer Technology Association (CTA) in the United States, Kenanga also highlighted the proposed US tariffs could reduce US consumer tech purchasing power by up to $143 billion annually.

According to the research house, the semiconductor sector has continued to thrive, with global sales growing 20.7 percent year on year as of November 2024. 

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