Over $12 million worth of AI chips seized by Malaysian authorities after suspected smuggling syndicate tries to sneak servers through customs under false pretenses

Malaysian customs have shared this week that $12.11 million worth of AI chips were discovered during an inspection. A total of 30 server units, each featuring cutting edge AI chips, were seized from Kuala Lumpur ​International Airport on October 15.

The servers originated from and were to be exported to two different, undisclosed Asian countries, according to Reuters. This should have required a trade permit, though the airport's customs director Aspalila Ag Tuah explained this week, "The ‌servers ⁠were falsely declared as electronic components... and shipped through Malaysia to ensure there would be no restrictions imposed while being exported to the next destination."

A Malaysian firm facilitating the movement of the servers has been called upon to assist in the investigation, though local authorities suspect this goes beyond them. This latest smuggling attempt is thought to be connected to at least five other similar cases involving nearly $25 million worth of chips in total.

The most recent of these cases saw $13 million worth of chips seized by Malaysian customs back in June—these were also falsely declared as "computer components." Aspalila said that all of these smuggling attempts are suspected to have been carried out by the same syndicate though, as the investigation is still ongoing, they did not share further information.

To briefly recap, the US has restricted the export of AI chips to a number of global destinations since at least the Biden administration. That's translated to pressure for Malaysia to stop banned AI chips potentially entering China by monitoring 'every shipment that comes to Malaysia when it involves Nvidia chips'.

Simply put, if certain chips can't be directly exported to China, then smugglers will take a more circuitous route with pit stops throughout Asia. For instance last year, Singaporean authorities arrested three men for a separate smuggling attempt, and earlier this year Taiwanese authorities detained an Nvidia employee for another alleged smuggling attempt. The US is also concerned that China might have a top-spec chipmaking machine despite export restrictions, but the machine maker ASML denies it.

With big tech still betting big on AI, often to the tune of even more multi-billion dollar investments, it's unsurprising the hardware is in demand worldwide. In fact, more than $100,000,000 worth of AI data centre freight has been reportedly stolen within the US alone since June. So long as data centre demand remains high, criminal activity may be likely to follow.