Businesses in APAC's semiconductor sector are facing stricter export controls and rising scrutiny. A look at recent developments and how to meet the challenge.
The impact of geopolitical tensions on a booming industry
Increasing enforcement and non-compliance risks
Singapore & Malaysia: Recent case prompts measures
Malaysia’s actions send strong signal across the region
Tips and useful resources for meeting evolving challenges
Semiconductor industry: Trade compliance best practice
The Asia-Pacific region is home to some of the leading semiconductor manufacturing hubs, accounting for more than half of the global market (source: Precedence Research).
Among them, Taiwan, South Korea and Japan, along with China are some of the traditional powerhouses of the semiconductor industry. Vietnam and India are emerging players who are likely to increase their respective shares of the market in the coming years. Malaysia and Singapore are also key players, each contributing significantly to different segments of the industry’s supply chains.
Driven by trends such as AI, cloud computing, the Internet of Things, 5G and others, the semiconductor industry, which was estimated to be about US$627 billion as of 2024 (source semiconductors.org), is projected to hit US$1 trillion in sales by 2030 (source: Deloitte).
Recent geopolitical tensions, however, especially between USA and China, have had a profound impact on the semiconductor industry in Asia Pacific, creating operational, strategic and legal challenges for companies.
The US is particularly focused on tightening and enforcing restrictions in this sector, particularly with reference to China, for various reasons: National security concerns, maintaining its technological edge, and reducing overreliance on China in its supply chain – to name just a few.
As US export controls are extraterritorial in nature, semiconductor companies using US items in their products have to be extra vigilant about China exports to ensure compliance. This especially applies to leading brands such as TSMC, Samsung, Tokyo Electron that are heavily reliant on US intellectual property and components.
The penalties for breaching US export controls can be highly punitive, both for the company as well as the individuals concerned. According to the US Department of Commerce, Bureau of Industry and Security (BIS), criminal penalties under the US Export Administration Regulations (EAR) can include up to 20 years of imprisonment and/or up to US$1 million in fines per violation. On top of that, there could be administrative monetary penalties that can reach up to US$300,000 per violation or twice the value of the transaction, whichever is greater. Offenders also risk being denied future export privileges (source: BIS).
With US items firmly embedded in global supply chains, governments from Singapore to Malaysia and Japan to Vietnam have been scrambling to tighten their export control laws to catch up with latest US measures and to strengthen their compliance framework. They also increased their enforcement measures, working closely with US agencies like the BIS, OFAC (Office of Foreign Assets Control), and DDTC (Directorate of Defense Trade Controls).
These developments have significantly amplified the trade compliance pressure on APAC businesses, especially those in high-tech sectors. Staying ahead of rapidly evolving trade policies and enforcement practices is key. It has become clear that in this environment, export compliance can no longer be just a back-office function but must be a critical part of an organization’s top management agenda.
The alleged transshipment of servers containing Nvidia AI chips to China via Singapore and Malaysia violating export restrictions has been dominating headlines this year.
The semiconductor industry is a key contributor to both countries’ GDPs, and both are vying to increase their shares of an aggressively growing global market in the coming years.
Malaysia commands a 13 percent share of the global market for the assembly, testing, and packaging of semiconductors (source: The Star). Singapore produces approximately 20 percent of the world’s semiconductor equipment (source: Asean Briefing). In addition, Singapore accounts for around 5 percent of global wafer capacity (source: Asean Briefing).
Given the importance of this sector for their respective economies, as well as the size and importance of their trading relationship with the US, both Singapore and Malaysia have responded proactively to the allegations:
AEB's Trade Compliance Management software solutions make it possible to automate and seamlessly document all export control steps, greatly minimizing the risk of criminal violations of foreign trade laws and regulations. Including screening your business partners, running export control checks across jurisdictions, managing licences, and keeping tabs on risks across your organization.
Malaysia’s Ministry of Investment, Trade and Industry (Miti) has also announced that going forward, it will be the only regulatory body that can issue non-preferential certificates of origin for shipments to the US, halting their issuance by Miti-appointed organizations like local business councils, chambers, and associations (source: Straits Times).
In the Nvidia case, there was no breach of Malaysia's Strategic Trade Act (STA) 2010, which governs the export, transit, and transshipment of strategic goods (including semiconductors), as the AI chips involved were not listed under the Strategic Item List, which outlines the categories of controlled goods and technologies. Nevertheless, Malaysian authorities are reassessing the scope of its export control list to determine if Nvidia's H100 and A100 should be included, subjecting them to stricter controls.
Additionally, Malaysia has formed a top-level task force to enhance regulations around its rapidly growing data center sector, which relies heavily on Nvidia chips. The US has called on the country to closely monitor shipments of these chips to ensure they are exclusively used in designated data centers and are not redirected to unauthorized destinations.
The government is also enhancing international cooperation to better monitor the flow of sensitive technologies. Companies operating in Malaysia have been advised to be aware of other countries' export controls to avoid the risk of sanctions on their goods or services.
The Malaysian governments’ actions are reminiscent of a broader trend across the APAC region, with many countries revisiting their trade compliance frameworks. Export control authorities across Asia Pacific are enhancing due diligence requirements, increasing customs scrutiny, introducing measures to increase transparency, and forming task forces to monitor chip flows more closely.
These moves signal a stronger commitment across APAC to support secure global supply chains while balancing local economic interests in the semiconductor industry.
Latest developments in the semiconductor industry across APAC demonstrate how ensuring cross-jurisdictional trade compliance relies on real-time monitoring of changes in multiple export control regimes and prompt organizational measures to align with latest requirements. Adding to this complex challenge are, for example:
In this environment, establishing a robust and adaptable Internal Compliance Program (ICP) is of vital importance to protect your business. An organization’s ICP needs to accommodate changing policies, legislation, and technologies, and cater for uncertainty and unpredictability.
Please refer to my previous articles to learn more about the best approach for an effective program:
My colleague Dr. Ulrike Jasper, export control expert and lawyer, also released a two-part guidance on how US export controls affect companies around the globe and how to best navigate this challenging environment:
One of Asia’s largest semiconductor distributors, Singapore-based Serial System Ltd, successfully elevated and future-proved its trade compliance management by leveraging technology to streamline its export control processes and modernize its IT infrastructure. The company significantly reduced manual workloads, improved accuracy, and avoided costly shipment delays while ensuring compliance.
"As a progressive company, we help our partners to become more competitive in dynamic marketplace. We constantly strive for innovation and efficiency. Ensuring operational excellence and trade compliance is vital for us."
Jack Wong, Group International Trade Compliance Officer, Serial System
Please connect with me on LinkedIn to stay in touch – I welcome any comments you may have. And if you would like to discuss how automation can support your own Internal Compliance Program and safeguard your business operation,
