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Southeast Asia's semiconductor hub is trying to walk the tightrope between Washington and Beijing in the AI chip race
Malaysia is making a calculated bet on Huawei’s AI hardware as it builds out sovereign artificial intelligence capabilities, positioning itself as one of the few countries willing to keep both American and Chinese chip suppliers on speed dial.
The chip play and its fallout #
Back in May 2025, Malaysia announced plans to deploy roughly 3,000 Huawei Ascend AI chips by 2026 as part of a sovereign AI project. The initiative was designed to establish full-stack AI infrastructure, the kind of setup that would give the country end-to-end control over its own artificial intelligence systems rather than renting capability from foreign cloud providers.
The project was driven by Skyvast, a private firm working in conjunction with DeepSeek’s large language model. Within days, the Malaysian government scrambled to distance itself from the announcement. Deputy Communications Minister Teo Nie Ching clarified that the project lacked official endorsement. She added that Huawei had not actually sold any chips in Malaysia.
Huawei doubles down anyway #
In April 2026, Huawei inaugurated its first AI Lab and Innovation Centre located outside of China, and it chose Kuala Lumpur as the site. The facility spans 13,638 square feet. Prime Minister Anwar Ibrahim attended the launch and emphasized that while technology may originate from various countries, the regulations governing its use would be established in Malaysia.
The collaboration took another step forward in July 2026 when Huawei Malaysia signed a Memorandum of Understanding with the National Cyber Security Agency, known as NACSA. The agreement focuses on AI security and digital sovereignty initiatives, effectively giving Huawei a formal role in helping Malaysia secure the very AI infrastructure that Huawei’s hardware powers.
Walking the tightrope #
The government has publicly affirmed a multi-vendor strategy for AI chips, meaning both Nvidia and Huawei products can be procured under regulatory guidance aligned with the National Semiconductor Strategic Plan.
Chips account for approximately 40% of Malaysia’s export economy, making the country one of the most important nodes in the global semiconductor supply chain.
The establishment of a National AI Office underscores how seriously the government takes this balancing act. Malaysia has set a target of becoming an AI-driven nation by 2030, and the office is meant to coordinate strategy across government agencies, private sector partners, and international collaborators.
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