Impact of US Export Controls on Singapore's Semi-conductor Industry and Ensuring Singapore-based Chip Companies Abide by New Rules to Safeguard Country's Business Reputation

Ms Joan Pereira asked the Deputy Prime Minister and Minister for Trade and Industry whether there are measures in place to ensure that entities operating in Singapore are compliant with export controls and international laws in order to protect Singapore’s status as a well-respected international business hub.

Assoc Prof Jamus Jerome Lim asked the Deputy Prime Minister and Minister for Trade and Industry (a) whether the Ministry is aware that Singapore will be placed under the new US AI export controls' Tier Two status; (b) whether it is a specific foreign policy objective of this Government to secure (i) the National Validated End-User status and (ii) Tier One reclassification under these controls; and (c) what specific technical and regulatory enhancements, if any, have been communicated by US counterparts as prerequisites for such status changes.

Assoc Prof Jamus Jerome Lim asked the Deputy Prime Minister and Minister for Trade and Industry in light of how US agencies have flagged Singapore as a hub for illicit chip transshipments to blacklisted Chinese AI firms (a) whether the Government is able to (i) disclose the foreign policy rationales behind its regulatory stance with regard to re-exports of such chips since 2023 and (ii) detail any or all inter-agency decisions that led to this situation; and (b) how does the Government intend to rectify any damage to Singapore’s credibility and ties with the US arising from such reports.

These pertain to questions over the United States (US) export controls and Singapore's approach to such measures. My response today will also cover a similar Parliamentary Question that has been filed by Mr Mark Lee1, that has been scheduled for a subsequent Sitting.

Singapore is a stable, trusted, reliable and well-connected international business hub. Our economic competitiveness is based on our commitment to the rule of law, zero tolerance for corruption, transparent regulations and an open inclusive business environment. We have painstakingly built up this reputation over time. That is why we take firm and decisive action against individuals and companies that violate our laws. It is the foundation of our competitiveness.

Questions have been raised about Nvidia chips that were subject to US export controls. We are scrutinising this issue carefully and will continue to do so. So far, our checks indicate that physical delivery of products sold by Nvidia to Singapore represent less than 1% of Nvidia's overall revenue. These are mainly deployed in Singapore for major enterprises and the Singapore Government. We understand that the remainder of Nvidia's revenue billed to business entities in Singapore did not involve physical shipments into Singapore.

If a company in Singapore is engaged in deceptive or dishonest practices to evade export controls that it is subject to, we will investigate and we will take the appropriate action in accordance with Singapore laws. It is in our national interest to secure access to leading edge technology and to maintain the integrity of our business environment.

Within Singapore, the transfer and brokering of strategic goods and technology is governed by the Strategic Goods (Control) Act. This is a robust framework that is aligned with major multilateral export control regimes, including those imposed by the United Nations Security Council.

Outside of these multilateral regimes, countries sometimes impose unilateral export controls on specific items. The US' export controls on advanced semi-conductor chips are one example.

Under these rules, the US expects companies to ensure their business transactions adhere to their requirements, including doing the required Know Your Customer (KYC) on the buyers of the advanced semi-conductor chips. While we currently do not have legal obligations to enforce the unilateral export controls of other countries, we expect all companies operating in Singapore to take into account such regulations if they apply to their international business activities. Their international business activities should be conducted transparently.

We certainly do not condone businesses deliberately using their association with Singapore to circumvent or violate the export controls of other countries. At the operational level, Singapore Customs works closely with its foreign counterparts, including those from the US to address their concerns and to facilitate their investigations where appropriate and to the extent our law permits.

It is important to emphasise that this open, inclusive and transparent regulatory regime applies to all our trading partners.

Some Members also had questions about the economic impact on Singapore arising from US controls on advanced semi-conductor chips. There is limited impact, in terms of our ability to manufacture and export chips. The US' current technology controls are aimed at a narrow subset of advanced semi-conductor chips, whereas Singapore's semi-conductor industry focuses on producing mature node chips which are used globally in appliances, automotives and industrial equipment.

However, in terms of access to advanced artificial intelligence (AI) compute – for example Nvidia H100 Graphics Processing Units (GPUs), the previous US administration had introduced an AI Diffusion Rule in January 2025 aimed at managing access to H100 or equivalent GPUs on a country-level basis. Singapore, like around 150 countries, has been classified as Tier Two. The details of the US AI Diffusion Rule have not yet been finalised by the current US administration, and the US has not communicated any specific requirements as prerequisites for changes to countries' tiering classifications.

Our objective is to ensure adequate access to AI compute by both local and international companies with operations in Singapore. We will ensure that US-headquartered cloud hyperscalers can continue to operate in Singapore as Universal Verified End Users and also support local companies that wish to apply to be National Verified End Users with access to AI compute.

In closing, I wish to assure Members that we will continue to work with companies based in Singapore to facilitate their access to advanced semi-conductor chips and technologies from all the major source countries. We will also continue to engage the US administration to address their concerns.

I thank Mr Yip for his supplementary question. Singapore has a robust export control regime and this is underpinned by a comprehensive strategic goods control legislation. The Strategic Goods (Control) Act 2002 and its subsidiary legislation governs and regulates the transfer and brokering of strategic goods and technology.

Singapore's list of control goods and technologies is aligned with four multilateral export control regimes, namely the Wassenaar Arrangement, the Australia Group, the Missile Technology Control Regime and the Nuclear Suppliers Group. And as I have alluded to earlier, the enforcement action is undertaken by Singapore Customs.

I wanted to give a bit more granularity in terms of how we manage the exports. Potential contraventions can include export, transshipment, transit of strategic goods without the requisite permits or providing false or misleading documents or information, incorrect declarations and brokering of strategic goods without a permit or being registered – and with that, criminal penalties can then be enforced.

How do we balance working with foreign counterparts? As I have earlier on mentioned in my reply, while we may currently not have legal obligations to enforce unilateral export controls of other countries, which may vary from time to time, companies that are operating in Singapore are expected to take into account such regulations if these apply to their international business activities.

The Ministry of Foreign Affairs (MFA) and Singapore Customs also have existing arrangements with some foreign counterparts, such as those in the US, to facilitate the investigation of companies of interest. From time to time, when we do get information of allegations and if we are aware of breaches, we will undertake to conduct these investigations ourselves.

The approach that we take is systematic and thorough, and we want to continue to emphasise that we have an open, inclusive and transparent regulatory regime and it applies to all of our partners today. I hope that addresses Mr Yip's supplementary question.

Thank you, Mr Speaker. I have one supplementary question for the Minister. May I know if there are plans to issue any industry guidelines to support firms operating in Singapore to comply with export controls and international sanctions?

I thank Ms Joan Pereira for her supplementary question. As I have shared earlier on, countries may have export controls from time to time, unilaterally. Where we have been very clear and transparent to companies operating within Singapore is that they are expected to abide by the countries' export controls, and not use Singapore as a country to bypass or circumvent these export controls.

To this end, as the hon Member has highlighted, it would not be possible to cover every potential, probable or future export controls that countries may unilaterally impose. But those principles that have guided us through to build us up to where we are a reputable business hub, these principles will continue to be consistent and we will hold true to these principles. From time to time, when these unilateral export controls come to our attention, we will work with the relevant countries to gain clarity, to engage them, as we are actively engaging with the US, our very important partner, to see how we can better manage and better educate the businesses that are based here to make sure that they are able to comply. I hope that gives the Member the reassurance.

Sir, I had originally posed my two Parliamentary Questions to the Ministry of Foreign Affairs (MFA) before they were redirected to the Ministry of Trade and Industry (MTI). I understand the motivation behind this redirection, but hopeful that the Minister or a Minister from MFA will be able to respond to questions that call for a more foreign policy approach.

Notwithstanding Minister Tan's assertions about the physical sales of Nvidia products being only around 1%, Nvidia's latest filing with the US Securities Exchange Commission states that for the nine months that ended October 2024, the company booked US$91 billion in total revenue, of which a little less than half is domestic; that is, domestic to the US. The next highest source is actually Singapore, with around $7 billion, and it is more than that for China, which includes Hong Kong, at $12 billion. This means that Singapore accounts for around 20% of Nvidia's global revenue. [Please refer to "Personal Explanation", Official Report, 26 February 2025, Vol 95, Issue 153, Personal Explanation section.]

It is not unusual for entrepôt hubs like us to book such inflated revenue figures, even if our value-added component is small or negligible, nor is this really about fraud, as the Minister seems to allude to, but actually legitimate accounting practices and rules of origin machinations.

Regardless, the headline imbalance invites commercial action, like what we have seen. So, if I may enquire if MFA was aware of these imbalances and if so, is it, in its assessment, that facilitating transshipment trade is positive or negative for the national interest from a foreign policy angle? And relatedly, is there a formal mechanism for MFA to review or provide input to MTI's trade decisions that have inevitable foreign policy implications?

And finally, one question directly for MTI, and given that Singapore is now being placed under Tier Two status by the US, what specific steps will the Government take or plan to take to prevent further downgrades of our status, which could jeopardise our AI hub aspirations?

Mr Speaker, Singapore is a transshipment hub, a vital regional and global headquarters for thousands of international companies. Our trade volume is three times our gross domestic product (GDP), and the range of activities that our companies are engaged in, and not just companies owned by Singapore and Singaporeans, but by global owners of these companies, have a regional and international footprint. So, I am not sure what Assoc Prof Jamus Lim is referring to when he says imbalances.

These unique characteristics are par for the course for the unique role that Singapore plays in the global economy. So, for instance, when, as the Member correctly said, Nvidia states in its returns that 22% of sales of chips were booked to entities with operations in Singapore, but my colleague has already explained to the Member only 1% physically came to Singapore and was deployed in data centres here, serving the Government and other major enterprises, including, I should add, hyperscalers. So, there is nothing unusual or unbalanced about that.

The nub of the question really is whether Singapore is being used by these enterprises and companies to evade unilateral export controls. And my colleague has very carefully explained to this House that Singapore, by law, through the Strategic Goods Control Act, gives effect to multilateral export control regimes. He referred to the Wassenaar Arrangement, the Australia Group and the Missile Technology Control Regime. Basically, these are focused especially on weapons or weapons of mass destruction, chemical and biological threats, and other potentially significant dual-use equipment. And these have force of law and we take our reference from the United Nations Security Council.

There are 200 countries in the world. It is possible for 200 countries to promulgate unilateral export measures. We have explained that we are not legally obliged to enforce that unilateral export measures of 200 countries. But we will enforce the multilateral agreed-upon export control regimes.

Having said that, it is not in our national interest to be made use of and for companies who, for whatever reasons, are trying perhaps to evade unilateral export control measures that apply to them, to use their association with Singapore – because people know Singapore is a clean, hygienic, transparent and reputable place – we will not allow them to use that association with us to engage in deceptive or evasive measures to avoid unilateral export measures that apply to them.

The point is the onus is on that company and we will not countenance evasion, deception, false declarations or even mis-accounting; and that we will act on.

And as and when a trading partner comes to us and says, "We have concerns", at that point, we would certainly facilitate investigations or at least, have a deeper look at the data and see whether there is any cause for concern, and we do that in order to protect our own national interest. Specifically for advanced semi-conductor chips. We too have a need for semi-conductors. It is true that we are also part of the global chains that manufacture and export semi-conductors.

But those that are currently manufactured in Singapore are not the H100s, the high-end chips which are used for AI. But we need them for our own purposes and we therefore have to monitor the export regimes of the manufacturers of these chips.

The Member referred to our Tier Two classification. Well, first of all, they call it the AI Diffusion Rule. It was first published near the tail-end of the Biden Administration. In fact, right now, the rules are up for comments and the situation is still evolving. We are not in Tier One, but we are in Tier Two, in good company with about 150 other countries. I do not want to get into detail about the exact number of chips and whether that currently poses a constraint for us. Needless to say, we will continue to engage the major exporting source of these advanced chips to ensure that we have adequate.

And I am sure Members of this House will also be aware, when dealing with sensitive topics like this, it is not in our national interest to compromise our negotiating positions when it deals with strategic items on this score. So, I hope the Member understands that the situation that has arisen is: one, because of our unique role and indeed our successful performance of this unique, global role; and two, the fact that we are a trusted, reliable and honest player.

If you zoom out, beyond chips and export controls, the point is this: Singapore, as a tiny island city-state and a trading hub, we do need to stand in favour of free trade. We do need to play a critical role in global supply chains.

Second point, because we are small, we have to subscribe to international law and multilateral rules, and processes and institutions to give effect to multilateral rules. It comes with being small.

Third point, we always have to seek to be relevant to the world, to be useful to big and middle powers, but we will not be made use of, either by other powers or even by companies pursuing pecuniary interest.

And my final point, in a world which is bifurcating, fracturing or polarising and divided, it is all the more important for us to play it straight, for me to say the same thing in Beijing and Washington, and to be fair. And that is why everything that Minister Tan has said applies to all our trading partners.

I think I have said enough. And I hope I have reassured the Member and other Members of this House.

Thank you, Speaker. I want to also address Assoc Prof Lim's point about Nvidia's quarterly revenue, as he shared earlier on.

I just wanted to put it into very clear perspective for the Member: in the third quarter of 2024, the proportion of Nvidia's quarterly revenue attributed to Singapore is 22%. This reflects the location where Nvidia's customers received the bill; it does not mean that it was shipped here. So, it is independent from the physical location that Nvidia and its customers deliver the goods to.

Let me share broadly with Members of the House. It is common practice for global entities to centralise the billing for procured goods and services in their hubs, but this is separate from where the products are shipped to. So far, from our checks and the data that we have on hand, it is revealed that in that quarter, less than 1% of Nvidia's overall revenue was physically shipped into Singapore. The remainder of Nvidia's revenue billed to business entities here did not involve physical shipments into Singapore.

I thank the Minister for the very comprehensive reply. The Minister has mentioned that Singapore has been classified as a Tier Two country under the US AI chip export controls. My supplementary question to the Minister is: what are the economic implications of being in Tier Two and does this classification impact Singapore's ability to attract AI chip investments, high-end semi-conductor research and development or even hinder our ambitions to be an AI development hub?

I thank Mr Lee for his supplementary question. As my esteemed colleague, Minister Vivian, has shared, we are in the broader base of the 150 countries. I think we are in good company.

As I have also mentioned in my reply earlier, the US AI Diffusion Rule has not yet been finalised by the current administration; and Minister Vivian has also alluded to the fact that it was released by the Biden Administration in the final days of his administration. Actually, it is on 13 January 2025, just over a month ago. And there is a 120-day comment period, which will end on 13 May 2025. The new administration has not commented on their policy or position towards the rule. So, we are among one of the 150 countries under this Tier Two status.

Whilst the US categorised 18 countries under Tier One, it did not share specific requirements on the tiering classification nor what requirements are required for a country to be reclassified from Tier Two to Tier One.

Access to AI compute is important for our national AI ambitions. As articulated in our National AI Strategy 2.0, we are adopting a multi-prong strategy to enable industry, academia and Government to undertake high-value AI activities. Besides securing access to advanced AI hardware and compute, we will also focus on talent and infrastructure development. We will continue to support companies operating in Singapore to gain access to advanced chips, including those that are under the AI Diffusion Rule.

Presently, most of the demand for advanced chips amongst our industry players come from US headquartered cloud hyperscalers. These are: Meta, Amazon, Google and so on. We will work with them to apply to be universal verified end users, so as to allow them to transfer a certain quantity of advanced chips to Singapore for their innovation and for their business needs.

For the local companies with significant AI compute requirements, they can apply to be the national verified end user. There are two tiers: a universal verified end user and a national verified end user. They can apply for the national verified end user status to receive access to advanced AI chips and we will support our local companies in their application.

Chips that are imported by both universal and national verified end users will not count towards the national cap imposed on Tier Two countries.

We are in consultation with industry players in Singapore to gather feedback on the potential impact of the draft rules on their business activities. This will allow us to better consider appropriate measures to support our companies and we are also, as I have said earlier, engaging the US to address their concerns and to also better understand their approach to the AI Diffusion Rule.