James Chai: Malaysia’s Chip Strategy, Rare Earth Leverage & The US–China AI Race – E672
James Chai, Visiting Fellow at ISEAS and former policy advisor to Malaysia’s Ministry of Economy, joins Jeremy Au to unpack how Malaysia is repositioning itself in an era defined by AI, semiconductors, and geopolitical rivalry. They explore the country’s shift from oil, gas, and plantations toward advanced manufacturing, examine how decades of semiconductor clustering built a quiet but durable export engine, and discuss why Malaysia is now doubling down on data centers and rare earths. The conversation covers US China competition over chip supply chains, the strategic importance of fabrication and GPU ecosystems, and how rare earth processing may represent the most underappreciated leverage point in the global tech stack. James also explains why execution, not ambition, will determine whether Malaysia can capture long term value from these emerging industries.
Youtube: https://youtu.be/0CgFwaamZZQ
Spotify: https://open.spotify.com/episode/024xgsFXfiuX0Zj7NFjWSB?si=t-t8VUXqQ7itwyE7iT5dcw
"If you think about the one true leverage that China has against everyone, it is rare earths. The reason they are willing to consider doing it outside of China is not economic or resource driven; it is largely geopolitical. If that is a way of constraining the US, they would do it, which means you do not supply those rare earths to the US but instead align supply in China’s favor. It is not explicit in the sense that working with one partner excludes the US, but it is incentive driven, similar to how Belt and Road projects have been structured, by making cooperation financially attractive enough that partners choose alignment. China also retains a significant edge in processing technology that is both advanced and cost competitive." - James Chai, Visiting Fellow at ISEAS
"That is especially true for commodities like rare earths, where there is no clear hero to anchor the narrative. There is no Nvidia that becomes the face of the industry, so the story is harder to grasp and harder to popularize. At the same time, that creates a niche for those who truly understand rare earth technology. It requires deep knowledge of chemistry, because the supply chain is fundamentally chemical in nature, and that technical mastery is what ultimately sets players apart." - James Chai, Visiting Fellow at ISEAS
"The discussion now is whether we have reached a point where AI is already good enough for practical use. Countries that are not competing in the LLM race, where firms constantly release new benchmarks to outdo one another, have to ask what the end goal really is. That question directly affects demand for chips. If you want to compete at the frontier, firms assume a chip lasts about three years before it must be replaced with a more powerful one. But that does not mean discarded chips are worthless. Most users are not training models; they are running inference, embedding AI capabilities into everyday products like vacuum cleaners and refrigerators. For those use cases, existing chips remain highly valuable and continue to see strong demand." - James Chai, Visiting Fellow at ISEAS