Malaysia is in discussions with semiconductor companies operating in the country to assess whether they can absorb the potential impact of US tariffs on chips, according to Investment, Trade, and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz. The move comes as Malaysia seeks to mitigate risks to its export-driven economy amid uncertainties in global trade policies.
Malaysia hosts a significant semiconductor industry, including major US multinational companies such as Intel and GlobalFoundries, making it one of the largest exporters of chips to the US. The discussions follow remarks by US President Donald Trump in February, stating his intention to impose tariffs of 25% or higher on semiconductors, though no specific timeline has been set for the decision.
Zafrul emphasized that Malaysia must first determine the scale and impact of these tariffs, as they could significantly affect chip exports. Speaking to Reuters, he noted that the government is in talks with companies to understand whether the cost burden would be absorbed by businesses or passed on to consumers. He added that exports would continue, but the question remains who will bear the higher costs. At present, the Malaysian government has not outlined any plans or financial measures to offset the tariffs.
In 2023, Malaysia exported $16.2 billion worth of chips to the US, making up nearly 20% of total US semiconductor imports, according to US trade data reviewed by Reuters.
Despite potential trade tensions, Malaysia’s data center industry remains resilient amid rising global demand for artificial intelligence (AI). Zafrul stated that export restrictions on advanced chips imposed by the previous US administration are unlikely to impact Malaysia’s data centers, given the continued strength of AI-driven growth. The country has emerged as a key data center and AI hub in Southeast Asia, attracting investments from US tech giants Microsoft, Google, Amazon, and Oracle, particularly in cloud services and infrastructure.
However, recent US restrictions on AI semiconductor exports, introduced in January under former President Joe Biden, may affect overseas expansion efforts. These new rules, set to take effect in May, limit US cloud service providers like Microsoft, Google, and Amazon to deploying only 50% of their total AI computing power outside the US, with a cap of 7% in Malaysia and other non-privileged countries.
While it remains unclear how the Trump administration will enforce these restrictions, both administrations have maintained a firm stance on limiting China’s access to AI chips. Nevertheless, Zafrul remains confident that Malaysia’s data center sector will continue to thrive, as these limitations were already factored into market growth projections. He stressed that the major data center operators in Malaysia are US companies, and discussions with industry leaders have confirmed that the allocated AI computing capacity is sufficient for continued expansion.
Despite global regulatory shifts, Malaysia’s data center and semiconductor industries continue to play a crucial role in the country’s digital economy, further strengthening its position as a key technology hub in the ASEAN region.