Malaysia smuggling corridor moves $3.75 billion in AI servers in one year

Trade data analyzed by the research institute Epoch shows an anomalous flow of servers from Malaysia to China between April 2024 and June 2025: 35,500 machines with a declared value of $3.75 billion, averaging $106 thousand per unit. The price spike — six times the value Malaysia itself reported for those exports — matches known smuggling patterns for advanced AI chips.

The discrepancy screams from the customs codes. HS-6 847150 covers servers of all kinds, but the average price logged on Chinese import declarations ($106 thousand) corresponds to AI servers equipped with advanced accelerators, not general-purpose gear. Malaysia told the UN it shipped 36,700 units to China in the same window at just $17 thousand each. A sixfold gap between exporter and importer reports is not unusual in mirror trade statistics, but the comparison with other destinations rules out innocent explanations: the United States recorded $1,500 per unit, Singapore $6,200, Hong Kong $11,700, Japan $23 thousand. Only China received "servers" priced like top-tier equipment.

The surge began roughly four months after October 2023, when the U.S. administration banned sales of Nvidia's A800 and H800 to China — the most powerful chips still legal there. It faded within two months of July 2025, when Malaysia issued Order No. 1/2025 requiring 30-day advance notice and a license for the export, transfer or transit of high-performance U.S. AI chips. The July–August transition period adds another $250 million and roughly 160 thousand H100-equivalent (H100e) if included, but the researchers separated it to isolate the corridor itself.

The incentives were clear: U.S. restrictions applied to sales to China, not to Malaysia, and Washington could not enforce them beyond its borders without cooperation from transit countries. Exports are not taxed and face minimal customs scrutiny, so smugglers could declare AI servers as ordinary servers without drawing attention. Chinese buyers, for their part, violated no Chinese law. Epoch tested alternative explanations — routing through Singapore or Hong Kong, reclassification under different codes — and none closed the gap. The data are public, the license is CC-BY, and the methodology is fully published.