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Either companies or consumers absorb higher costs,

minister says

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Malaysia data centres seen unaffected by US restrictions

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Demand for AI to drive data centre growth

By Danial Azhar

KUALA LUMPUR, March 6 (Reuters) - Malaysia is discussing

with chip companies based in the country whether they can absorb

the impact of potential U.S. tariffs on semiconductors, its

trade minister said, as it looks to hedge against risks to its

export-driven economy.

The Southeast Asian nation is home to a large semiconductor

industry, including top U.S. multinationals such as Intel ( INTC )

and GlobalFoundries ( GFS ), and is one of the top

exporters of chips to the United States.

U.S. President Donald Trump said in February that he intended to

impose tariffs on semiconductors starting at "25% or higher",

though it is unclear when this decision could be made.

Malaysia would need to see the magnitude and quantum of the

tariffs, Trade Minister Tengku Zafrul Aziz said in an interview

with Reuters on Wednesday, as they could have a significant

impact on its exports.

"We're discussing with the companies... whether the tariffs

will be absorbed by the consumers," Tengku Zafrul said.

"Exports will continue to happen but someone has to pay for

the higher cost, whether it be the consumers or the companies

that absorbs."

Tengku Zafrul said the government has not discussed what it

will do or whether it will provide financial support to offset

tariffs.

Last year, Malaysia shipped $16.2 billion worth of chips to

the U.S., accounting for nearly 20% of all U.S. semiconductor

imports, U.S. trade data reviewed by Reuters show.

RESILIENT DATA CENTRE GROWTH

Tengku Zafrul also said Malaysian data centres were unlikely

to be affected by export restrictions imposed on advanced chips

by the previous U.S. administration as demand for artificial

intelligence remains strong.

Malaysia is fast becoming a major hub for data centres and AI

factories in Southeast Asia, with investments from U.S.

technology giants including Microsoft ( MSFT ), Google

, Amazon ( AMZN ), and Oracle, mainly in cloud

services and data centres.

However, this investment boom may be hampered by new

restrictions adopted in the final days of Joe Biden's

administration in January on the use of U.S. chips overseas, in

a bid to further restrict China's access to AI semiconductors.

It remains unclear how Trump will enforce the new rules but

the two administrations share similar views on the competitive

threat from China.

Under the new rules, which are set to take effect in May,

U.S. cloud service providers, such as Microsoft ( MSFT ), Google and

Amazon ( AMZN ), will be allowed to deploy only 50% of their total AI

computing power outside the United States, and no more than 7%

in Malaysia and other countries that have not been granted

privileged access to U.S. chips.

Tengku Zafrul said Malaysia's data centres will not be

impacted given the sector's growth trajectory accounted for the

limits of the restrictions.

The sector's prospects will be further boosted by the fact

that the big data centre companies in Malaysia are U.S.

companies, he added.

"When we talk to the data centre players, Microsoft ( MSFT ), Google,

AWS ... there is not a concern because the allocation (under the

restrictions) is adequate," Tengku Zafrul said.

"There will be no impact on the growth in data centres

because AI will be used by many."