US AI Chip Policy Shifts: Southeast Asia's Rise as a Semiconductor Hub

The Trump administration's dismantling of the Biden-era AI Diffusion Rule has reshaped global semiconductor dynamics, transforming Malaysia and Thailand into pivotal intermediaries for US chip redistribution. This policy pivot, which rescinded sweeping export restrictions on 150 countries including Southeast Asian nations, has created a strategic opening for these regions to become linchpins in the global semiconductor supply chain. For investors, this shift presents a rare opportunity to capitalize on infrastructure and logistics plays in a sector primed for growth, while posing risks to China's AI ambitions.

Policy Reversal Fuels Southeast Asia's Semiconductor Ambitions

The rescission of the AI Diffusion Rule in May 2025 marked a decisive shift from Biden's tiered approach, which had categorized Malaysia and Thailand as “middle-tier” nations subject to stringent export licenses. Under Trump's new framework, the US has prioritized bilateral negotiations over blanket controls, granting these countries greater access to advanced chips without prior approval. This relaxation has positioned Malaysia—already the world's fourth-largest semiconductor exporter—alongside Thailand as key redistribution hubs. Both nations now serve as critical gateways for US firms like Nvidia and Oracle, enabling them to bypass China's restrictive markets while maintaining supply chain resilience.

Malaysia's semiconductor exports reached $36.94 billion in 2024, with China and Hong Kong accounting for 36% of its shipments. The removal of licensing hurdles will likely accelerate this trade, as companies like Intel and GlobalFoundries ramp up production in Malaysia. Meanwhile, Thailand's $815 million in integrated circuit exports to China in 2023 underscore its role in regional supply chains, now amplified by looser US restrictions.

Winners and Losers in the New Semiconductor Landscape

Beneficiaries:
- US Tech Giants: Firms like Nvidia and Oracle gain unfettered access to Southeast Asia's assembly and testing infrastructure, enabling them to diversify supply chains away from China.
- Malaysian/Thai Logistics & Infrastructure: Companies involved in semiconductor logistics, testing, and cleanroom facilities—such as Penang-based Unisem or Thailand's Jotana—are poised for growth as redistribution hubs.
- US-China Trade Truce Uncertainty: While the temporary truce (expiring August 2025) eases EDA software restrictions, prolonged tensions could further incentivize firms to rely on Southeast Asia as a “China Plus One” alternative.

Risks to China:
- Supply Chain Disruption: Relaxed controls on Malaysia/Thailand may inadvertently strengthen China's access to US chips via third-country channels, though the US has tightened “red flag” scrutiny for diversion.
- Competitive Marginalization: As Southeast Asia becomes a low-cost, high-capacity hub, China's dominance in mid-tier semiconductor manufacturing faces erosion.

Investment Strategy: Betting on Infrastructure and Logistics

The policy shift creates a clear investment thesis: allocate capital to logistics and tech infrastructure firms enabling Southeast Asia's rise as a redistribution hub. Key sectors include:
1. Semiconductor Testing & Packaging: Companies like Unisem (Malaysia) and PT Topy Industrial (Thailand) benefit from rising demand for assembly services.
2. Logistics & Supply Chain Management: Firms such as CWT Limited (Singapore) or Thai Logistics Group are critical for chip distribution across the region.
3. Cleanroom Infrastructure: Investors should target firms like MySETEC (Malaysia), which specialize in semiconductor facility construction.

Risks and Considerations

• Geopolitical Volatility: The August 2025 expiration of the US-China truce could reintroduce tariffs or controls, disrupting supply chains.
• Market Saturation: Over-investment in Southeast Asia's semiconductor capacity might lead to oversupply if demand stagnates.
• US Enforcement Strings: While restrictions are relaxed, firms must comply with “red flag” due diligence to avoid penalties.

Conclusion

The Trump administration's policy shift has catalyzed Southeast Asia's emergence as a semiconductor redistribution powerhouse. For investors, this means focusing on logistics and infrastructure plays that underpin Malaysia and Thailand's growth. While risks remain, the strategic realignment of US chip exports positions these regions as indispensable nodes in a global supply chain increasingly wary of overreliance on China. As the semiconductor market evolves, the winners will be those who bet on the infrastructure enabling this tectonic shift.

Investment Advice:
- Add to portfolios: Shares of logistics and testing firms in Malaysia/Thailand.
- Monitor: US-China trade developments post-August 2025 and semiconductor export data from Southeast Asia.
- Avoid: Overexposure to Chinese mid-tier semiconductor manufacturers facing supply chain diversification.

The era of tiered restrictions is over. The new frontier is Southeast Asia's semiconductor renaissance.