Malaysia China Chip Smuggling

Every cross-border shipment is recorded twice, once by the exporting country and once by the importer. Epoch AI's Isabel Juniewicz compared both records for servers moving from Malaysia to China (epoch.ai). Between April 2024 and June 2025, China recorded $3.75 billion of Malaysian-origin servers, while Malaysia recorded about $0.6 billion of server exports to China. The two countries counted roughly the same number of machines, 35,500 and 36,700, but valued them very differently: about $17,000 each leaving Malaysia and $106,000 each arriving in China. Epoch says the high Chinese prices fit AI servers better than ordinary ones.

The window is bounded by two policy events. The flow started a few months after the US banned exports of Nvidia's A800 and H800 GPUs to China in October 2023, and collapsed within weeks of Malaysia's July 2025 rule requiring a permit to export or transship high-performance US-origin AI chips. Epoch's proposed explanation is that intermediaries declared AI servers as ordinary ones on export paperwork, which customs rarely audits, while Chinese buyers, who were breaking no Chinese law, had less reason to undervalue them. It tested rerouting through Singapore or Hong Kong, alternative product codes, coincidence and a fall in Chinese demand, and found none satisfactory.

Epoch says the pattern does not prove diversion. Its rough estimate of about 150,000 H100-equivalents divides the dollar value by an H100 price and takes customs records at face value; a mix made up mostly of Nvidia's slower H20 would imply as few as 50,000. Even at 150,000, it would be about a quarter of the median in Epoch's broader model of total chip smuggling.