Malaysia's AI aspirations under siege in the US-China technology conflict?
As Malaysia moves forward with its National Artificial Intelligence Roadmap from 2021 to 2025, focusing on sectors like supply chains, agriculture, healthcare, smart cities, education, and the public sector, the adoption of AI technologies among micro, small, and medium-sized enterprises (MSMEs) remains at a nascent stage[1].
Despite MSMEs accounting for 97% of businesses in the country, only about 13% of MSMEs have adopted AI technologies[5]. Recognising this gap, the Malaysian government has made MSMEs a priority in its AI development efforts through the National AI Office (NAIO), established in 2024, and the National Artificial Intelligence Roadmap 2021–2025[5].
The broader AI ecosystem in Malaysia is experiencing significant growth, with RM3.29 billion (approximately USD 740 million) invested in the first half of 2025, reflecting strong investor confidence and positioning Malaysia as a regional AI hub[2]. AI and technology contributed 23.5% to Malaysia’s GDP in 2023, with a target to rise to 25.5% by the end of 2025[1][2].
However, concerns have arisen due to Malaysia’s reliance on imported AI chips, particularly from US companies like Nvidia. Recently, the US Commerce Department reportedly planned to require export licenses for Nvidia’s advanced AI chips bound for Malaysia and Thailand[3]. The intended purpose of these restrictions is to prevent China from acquiring these chips through third countries or smuggling[4].
The impact of the US-China arrangement on US concerns about chip transshipment through Southeast Asian countries like Malaysia is uncertain. Meanwhile, Nvidia has resumed exports from the US to China since last month, as part of a trade deal involving access to rare earth minerals[4].
Government-led initiatives focus on upskilling and ethical AI frameworks, such as Huawei Cloud's program to train 30,000 Malaysians—including industry professionals and government officials—over three years, and government upskilling initiatives funded with hundreds of millions of ringgit[3]. These efforts are expected to support wider AI adoption in MSMEs in the near future.
Despite these efforts, challenges remain, such as Malaysia’s reliance on imported AI chips and potential supply chain vulnerabilities due to international trade restrictions, which could slow down AI uptake among MSMEs and startups[5].
In summary, while the national AI ecosystem in Malaysia is growing rapidly, with billions invested and AI contributing significantly to GDP, AI adoption among MSMEs remains limited (about 13%). Government-led initiatives focus on upskilling and ethical AI frameworks, which may accelerate MSME adoption. However, supply chain and chip import dependencies pose risks to scaling AI implementation locally.
References:
- Malaysia's GDP by sector
- Malaysia's AI contribution to GDP
- Huawei Cloud's training program
- US export restrictions on Nvidia chips
- AI adoption among Malaysian MSMEs
- The Malaysian government's AI development efforts, aimed at various sectors including supply chains, agriculture, healthcare, smart cities, education, and the public sector, seek to increase AI adoption among micro, small, and medium-sized enterprises (MSMEs).
- In an attempt to bridge the gap between AI adoption among MSMEs and the broader economy, government-led initiatives like Huawei Cloud's program to train 30,000 Malaysians over three years have been established, focusing on upskilling and ethical AI frameworks.
- Financing is a crucial factor in the growth of AI technology, and the Chinese telecommunications giant Huawei is investing in upskilling initiatives, funded with hundreds of millions of ringgit, to support wider AI adoption in MSMEs.
- The AI ecosystem in Malaysia has attracted substantial investments, such as RM3.29 billion (approximately USD 740 million) in the first half of 2025, which reflects the strong interest of global investors in the region's AI potential.
- The AI roadmap in Malaysia also covers the field of education, with the aim of enhancing the capabilities of students and educators in artificial intelligence, technology, science, culture, business, industry, finance, and other sectors.
