[MALAYSIA] Malaysia announced plans to build a pioneering artificial intelligence system powered by chips from Huawei Technologies Co.—only to backtrack the following day, highlighting the country’s precarious position in the escalating tech rivalry between the United States and China.
Deputy Communications Minister Teo Nie Ching had said in a speech that Malaysia would become the first country to deploy a specific class of Huawei's "Ascend GPU-powered AI servers at national scale." According to prepared remarks, the country aimed to roll out 3,000 of Huawei’s top-tier AI units by 2026. She also noted that Chinese startup DeepSeek would contribute one of its AI models to Malaysia’s efforts.
Initially seen as a bold step forward in AI, the project quickly became a geopolitical flashpoint. The U.S., which has been working to curb China’s global tech influence, could have viewed Malaysia’s alignment with Huawei as a win for Beijing. But the government’s rapid retraction signaled the pressures Malaysia faces as it tries to balance innovation with international diplomacy.
The announcement was first reported by Malaysia-China Insight and caught the attention of Washington, where officials are wary of China’s expanding AI footprint. “As I’ve been warning, the full Chinese stack is here,” wrote David Sacks, AI and crypto policy lead under President Donald Trump, on X. He added that the Trump administration’s decision to lift Biden-era semiconductor export restrictions to Malaysia came “just in time.”
Teo’s office confirmed that her remarks on Huawei were being withdrawn, without offering further clarification.
The incident comes amid tightening U.S. export controls on advanced technologies, particularly those related to AI and semiconductors. While the Trump administration recently moved to relax some restrictions for Malaysia, potentially as a strategy to draw it closer to Washington, the country’s reversal suggests it is weighing its options carefully.
Whether Malaysia will move forward with the Huawei-backed initiative remains uncertain. Huawei declined to comment. The reversal follows recent guidance from the U.S. Commerce Department, which initially warned foreign entities that using Huawei’s Ascend chips “anywhere in the world” could violate American export rules. That language was later softened, following pushback from Beijing.
Malaysia has emerged as a key test case for the Trump administration’s latest AI strategy. The Southeast Asian nation seeks to boost its digital economy through partnerships with top tech firms, but it must also avoid being ensnared in the intensifying U.S.-China tech conflict.
Spearheaded in part by Sacks, Washington’s new approach aims to saturate global markets with American AI hardware—accompanied by security safeguards—to deter countries from relying on Chinese technology for their data centers, especially in regions like Southeast Asia and the Middle East.
Time, Sacks argues, is limited. Huawei is closing the gap with U.S. giants like Nvidia Corp. at a rapid pace. The Trump administration is simultaneously cracking down on illegal exports of high-performance Nvidia chips to China via third-party nations. Malaysia has been identified as a particular concern.
Much of the urgency stems from Huawei’s rapid rise. After developing breakthrough chips for its Mate 60 Pro smartphone in 2023, the firm has expanded into electric vehicles and AI, with aspirations to compete directly with Nvidia.
Although Huawei’s Ascend chips are primarily used by Chinese companies shut out from Nvidia’s cutting-edge products, experts say they are still highly capable of supporting advanced AI services. Nvidia CEO Jensen Huang has described Huawei as one of the most formidable tech firms globally, adding that China is now “right behind” the U.S. in AI development.
That race intensified last week, as President Trump embarked on a whirlwind tour of the Middle East, announcing deals to supply tens of thousands—potentially over a million—Nvidia and AMD chips to Saudi Arabia and the UAE. Both Gulf states have ambitious AI agendas and are central to Washington’s tech diplomacy.
Though the shipments still require licensing, the deals have already stirred internal divisions in the Trump administration and drawn bipartisan scrutiny. Some officials worry that the partnerships could indirectly benefit China, which maintains deep ties in the Gulf region. Concerns also persist that massive projects like the UAE’s upcoming data center—expected to be among the largest globally—could undermine efforts to keep cutting-edge AI development anchored in the U.S.
As Trump officials work out the details of those deals, they are also drafting a new regulatory framework to replace former President Joe Biden’s “AI diffusion” policy. That initiative had expanded export curbs beyond China, placing national sales caps and licensing hurdles on countries including Malaysia. The Biden-era policy had effectively limited U.S. tech firms from concentrating more than 7% of their global cloud capacity in any one non-ally nation.
Malaysia was set to surpass that threshold. Research firm SemiAnalysis noted that Oracle Corp.’s planned data center expansion in the country would have breached those limits.
The revised rules are expected to include strict controls on countries suspected of rerouting U.S. chips to China. Malaysia is on that list. Trump officials have already urged Malaysian authorities to clamp down on chip transshipments to China.
The scrutiny intensified with a court case in Singapore, where three individuals were charged with fraud for allegedly concealing the true recipient of AI servers containing banned Nvidia chips. Malaysian authorities have launched their own investigation into the matter.
WhatsApp
Instagram
Threads
