Malaysia Weighs Absorbing Potential US Chip Tariffs With Companies

Malaysia is in talks with semiconductor companies to determine whether they can absorb potential US tariffs on chips, Trade Minister Tengku Zafrul Aziz said. The move aims to mitigate risks to the country’s export-driven economy.

Malaysia hosts a significant semiconductor industry, including major US firms such as Intel and GlobalFoundries. It is also one of the largest exporters of chips to the United States.

US President Donald Trump announced in February his intention to impose tariffs of "25% or higher" on semiconductors, though the timeline for implementation remains unclear.

Tengku Zafrul said Malaysia needs to assess the scale of the tariffs, as they could significantly impact exports.

"We're discussing with the companies... whether the tariffs will be absorbed by the consumers," he said. "Exports will continue to happen, but someone has to pay for the higher cost, whether it be the consumers or the companies that absorb it."

The government has not yet decided whether it will provide financial support to offset the tariffs.

In 2023, Malaysia exported USD 16.2 billion worth of chips to the US, accounting for nearly 20% of all US semiconductor imports, according to US trade data.

Data Centre Growth Remains Strong

Tengku Zafrul also said Malaysia’s data centre sector is unlikely to be affected by US export restrictions on advanced chips, as demand for artificial intelligence remains strong.

Malaysia is emerging as a key hub for data centres and AI factories in Southeast Asia, attracting investments from US technology giants such as Microsoft, Google, Amazon, and Oracle. These investments primarily focus on cloud services and data centres.

However, new restrictions introduced in January by the Biden administration could impact this growth. The rules, set to take effect in May, will limit US cloud service providers to deploying only 50% of their total AI computing power outside the US. Additionally, Malaysia and other countries without privileged access to US chips will be restricted to just 7% of this capacity.

Despite these restrictions, Tengku Zafrul said Malaysia’s data centre sector will not be affected, as its growth trajectory has already accounted for these limits.

"When we talk to the data centre players, Microsoft, Google, AWS... there is not a concern because the allocation (under the restrictions) is adequate," he said. "There will be no impact on the growth in data centres because AI will be used by many."

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• Malaysia is discussing with chip companies whether they can absorb potential US tariffs.

• The US may impose tariffs of "25% or higher" on semiconductors, though the timeline is unclear.

• Malaysia exported USD 16.2 billion worth of chips to the US in 2023.

Source: REUTERS