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AII-1001-99023
Under investigationA regulator, court or police has opened a formal inquiry and reached no finding yet.

Chinese engineers train AI model in Malaysia using smuggled training data

Chinese AI companies reportedly circumvented US chip export controls by physically smuggling training data on hard drives to Malaysia, where engineers trained an AI model on rented servers with advanced NVIDIA chips before returning the trained model to China.

March 2025 Β· United States Β· Security and cyberattacks
March 2025
AII-1001-990235 sources ↓
Quick facts
Category
Security and cyberattacks
Country
Malaysia
Source
Wccftech
Date
March 2025
Drafted by
Raidu Incident Detection

What happened

In early March 2025, four Chinese engineers flew to Malaysia from Beijing, each carrying a suitcase containing 15 hard drives with a total of 80TB of spreadsheets, images and video clips.

The data was trained on 300 local servers containing advanced NVIDIA chips rented by the engineers' employers, with the intention of building an AI model before returning it to China.

Engineers spent over eight weeks optimizing the data sets and adjusting the AI training program before the data left the country, and reportedly returned home with several hundred GB of data including model parameters.

Reported impact

The operation circumvents US export restrictions on advanced AI chips by using physical data smuggling and rented foreign infrastructure instead of shipping restricted hardware.

Index analysis

The physical transport of training data on hard drives bypassed digital firewalls and surveillance across multiple jurisdictions that monitor digital data transfers.

Governance controls

Malaysia was previously accused of helping China circumvent the NVIDIA AI chip ban, and a ministry investigation was reportedly underway into alleged breaches involving Nvidia's AI chips.

Classification

Category
Security and cyberattacks
Industry
IT infrastructure and hosting
Country
Malaysia
Harm status
Actual harm
Intent
Intentional
Timing
Unknown
Harm types
Economic or property
Harmed
Government
AI systems
Chinese AI model trained in Malaysia

Sources and evidence

This record was researched and written by the Index, based on the following original reporting.

Wccftech
After Smuggling Chips, China's AI Engineers Now Sneak Hard Drives Into Malaysia to Train AI Models Using Rented NVIDIA High-End AI Chips
14 June 2025
Lowyat.NET
Chinese Company Trains AI Model In Malaysia To Evade US Ban
16 June 2025
MoneyControl
Suitcases of drives, rented servers abroad: How China's AI firms are evading US chip crackdown
16 June 2025
TechRadar
Massive petabyte data transfers are replacing black market chips as China trains AI outside its borders
16 June 2025
Economic Times
Chinese AI developers fly hard drives abroad to sidestep US chip curbs: WSJ report
17 June 2025