A top Senate Republican is calling on Commerce Secretary Howard Lutnick to investigate alleged smuggling of U.S. chips through Malaysia, warning that the chip diversion undermines American artificial intelligence (AI) leadership while bolstering China’s AI industry.
In a letter sent Oct. 30 to Lutnick, Sen. Tom Cotton, R-Ark., said that the United States should support Malaysian officials in their efforts to crack down on the illegal diversion of U.S. chips used for AI.
“The Commerce Department has an opportunity to provide Malaysia with the support and resources it needs to achieve this goal,” wrote Cotton. “Curbing chip smuggling in Malaysia will increase U.S. business opportunities in Southeast Asia, which is crucial as Malaysia seeks to become a regional datacenter powerhouse, hopefully running on American technology.”
Last month, a report from Congress warned that despite U.S. efforts to slow the technological rise of the Chinese Communist Party (CCP), Beijing received $38 billion of advanced semiconductor equipment in 2023, making up more than half of the world’s total exports of those tools. That equipment was manufactured in the United States, Japan, and the Netherlands.
Meanwhile over the last year, the Commerce Department has implemented new export controls to limit the CCP’s access and ability to make advanced chips on its own, including rolling back certain export authorizations for major exporters.
To address chip diversion in Malaysia, the senator suggested that the Commerce Department provide guidance, best practices, and information sharing to help Malaysia build foreign direct investment and a beneficial ownership information screening program to assess new data centers in Malaysia for CCP involvement.
Cotton also recommended that the department work with industry partners to implement innovative software and firmware-based anti-diversion techniques on advanced chips exported to Malaysia, which would “help add layers of assurance against illegal diversion.”
Those efforts could also include priority customs clearance procedures for shipments of advanced U.S. chips with anti-diversion mechanisms.
Working with Malaysian officials would fall under priorities outlined under the White House’s AI Action Plan released this summer, the senator added, which calls on federal agencies to implement location verification features on advanced AI components to ensure that chips aren’t exported to adversarial nations.
“While Congress works to codify President Trump’s directives to help with U.S. export promotion and enforcement, I hope you take advantage of this chance to leverage American talent and technology,” Cotton wrote.
“President Trump has acknowledged export controls as a critical tool of U.S. economic and technological statecraft. We have no time to waste,” he added.