A data center in Singapore ordered $250 million worth of U.S.-made servers containing advanced AI chips. The vendor subsequently shipped the devices to an unauthorized third party.
Did the transaction violate export control laws in both countries?
The question came up in a tariffs-related phone call between Singapore’s Deputy Prime Minister Gan Kim Yong and Howard Lutnick, the U.S. commerce secretary. Lutnick expressed concern about the unrestricted sale of high-end chips “not just to Singapore, but generally.”
The servers were dispatched to a customer in Malaysia and likely contained chips from Nvidia, a leading manufacturer of GPUs (graphics processing units) used by the artificial intelligence companies.
Singapore was Nvidia’s second-largest market in 2024, accounting for nearly $24 billion, or 18 percent of the chip maker’s revenues.
The magnitude of sales to the city-state spurred a U.S. congressional committee to investigate the national security risk posed by Nvidia chip orders from Southeast Asian countries. Lawmakers were concerned that vendors in Singapore and Malaysia may have been part of an illicit chip pipeline for DeepSeek, China’s new artificial intelligence startup.
In February, three individuals faced fraud charges in Singapore for making false statements to U.S. suppliers (Dell and Supermicro) about the identity of the end user.
Nvidia’s spokesperson put out a clarification stating that “the revenue associated with Singapore does not indicate diversion to China.”
In past years, Singapore’s trade surplus ($2.8 billion in 2024) was viewed favorably in Washington, D.C. The affluent city-state splurges on a host of high-end American products ranging from strawberries to semiconductors.
Singapore is also unique among the Association of Southeast Asian Nations (ASEAN) countries in its ability to maintain a consistent trade surplus with the U.S.
Under the 2004 United States-Singapore Free Trade Agreement, most transactions are tariff-exempt. However, the sweeping 10 percent tariffs imposed by the Trump administration in April have upended a long relationship of unrestricted trade between the two economies.
In an interview with Financial Times, Foreign Minister Vivian Balakrishnan said the tariffs announcement had “shaken the foundational pillars of the world trading system, right down to the core. If that collapses… it is going to be very hostile for small nations… who are exquisitely sensitive to global trade.”
On a state visit to Washington, D.C. in 1985, Singapore’s founding Prime Minister Lee Kuan Yew warned, “Once America alters the rules of international trade, there will be fundamental realignments of economic and political positions.”
Singapore now faces surcharges on medical exports such as pharmaceuticals and vaccines. In a social media post, former diplomat Tommy Koh, who was chief negotiator for the free trade pact, wrote that under the agreement, “the U.S. cannot unilaterally raise tariffs against imports from Singapore.”
Both nations can take countermeasures or seek arbitration. However, Deputy Prime Minister Gan ruled out retaliatory tariffs, saying that punitive measures would “create choke points for supply chains, and also undermine the confidence of consumers and businesses.”
Prime Minister Lawrence Wong called a general election on May 3 to consolidate his government’s position at a “critical juncture.” The ruling People’s Action Party (PAP) won a majority as anticipated, improving its vote share by four percentage points. A former member of parliament told the New York Times that “people voted for stability.”
The 65.5 percent mandate was seen as a strong endorsement for Wong, who urged voters to pick an “experienced team.” In one of his final rallies, the prime minister cautioned: “The storm is already upon us, and we must brace ourselves for more turbulence.”
Singapore must now confront both tariffs and “strict licensing requirements” on AI chip imports from the U.S. The congressional committee investigating Nvidia recommended controls on shipments to certain countries due to the “high risk of diversion” to unauthorized users.
Last week, the Bureau of Industry and Security at the U.S. Department of Commerce released a statement on the Trump Administration’s new strategy for AI chips, which would tighten some export controls to keep “the technology out of the hands of our adversaries” while also easing regulations on sales to “trusted foreign countries.”
In his call with Lutnick, Gan assured his U.S. counterpart that the government would initiate action against entities “taking advantage of their presence in Singapore to undermine export controls by other countries.”
Gan also heads the Ministry of Trade and Industry, which issued a statement in February reminding U.S. chip manufacturers about their obligation to abide by export laws in both countries.