Malaysia to take action against companies linked to Nvidia chip fraud case

Malaysia has stated that it will take “necessary action” against Malaysian companies if they are found to be involved in a fraud case related to the alleged movement of Nvidia artificial intelligence (AI) chips from Singapore to China.

The response follows comments by Singapore’s Minister for Law and Home Affairs, K Shanmugam, who confirmed on 3 March that servers containing Nvidia AI chips were directed to Malaysia.

These chips are subject to US export restrictions, raising concerns about potential violations.

However, Malaysian authorities are questioning why the shipments were recorded as heading to Malaysia in the first place.

Malaysia’s Minister for Investment, Trade and Industry, Tengku Zafrul Aziz, stated that there was no evidence of data centre companies in Malaysia using unauthorised chips.

He stressed that the chips “are not meant to be in Malaysia in the first place,” adding, “So the question is, why is it going out of Singapore?”

Singapore insists on independent investigation

Singapore has charged three individuals with fraud linked to the movement of these servers, with at least six others under investigation.

The accused include two Singaporeans and a Chinese national who allegedly made false declarations regarding the intended recipients of the shipments.

Shanmugam stated that Singapore’s investigation was conducted independently and was not initiated by the US or any other country.

He acknowledged that Singapore has strict trade laws but noted that enforcing them in the context of global supply chains is complex.

While initial reports suggested Malaysia may have been a transit point for the shipments, Malaysia’s response indicates concern that the shipments were assigned to Malaysia on paper, even if they never physically left Singapore.

MTI clarifies Nvidia’s revenue in Singapore reflects billing, not shipments

Further scrutiny has fallen on Nvidia’s business presence in Singapore.

On 18 February, Singapore’s Second Minister for Trade and Industry, Tan See Leng, clarified that while 22% of Nvidia’s Q3 2024 revenue was attributed to Singapore, this does not indicate large physical shipments.

“This reflects the location where Nvidia’s customers received the bill, [but it] doesn’t mean that it shipped here,” Tan explained in Parliament.

“It’s independent from the physical location that Nvidia and its customers deliver the goods to.”

He further clarified that Nvidia’s actual physical deliveries to Singapore represented less than 1% of its overall revenue, mostly deployed in major enterprises and government projects.

“The remainder of Nvidia revenue billed to business entities here did not involve physical shipments into Singapore,” Tan confirmed.

Ongoing investigations and broader concerns

The case has drawn international attention, particularly amid reports that the US Commerce Department is investigating whether Chinese AI company DeepSeek obtained restricted Nvidia chips through smuggling networks.

A Reuters report in January suggested that AI chip smuggling operations have been tracked through multiple countries, including Malaysia, Singapore, and the United Arab Emirates.

Singapore maintains that it does not condone businesses using its jurisdiction to bypass export controls.

However, Malaysia’s questioning of why the shipments were documented as moving towards it suggests concerns about how companies in Singapore managed the process.