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By attracting capital, technology, and supply chains from both nations, Southeast Asia has spent years benefiting from the U.S.-China competition without ever having to pick a side. [1] However, this neutral ground is now shrinking as the geopolitical rivalry increasingly focuses on artificial intelligence chips, data centers, and advanced computing capacity.

Caught Between the U.S. and China

Southeast Asia has become both a prime destination for major corporate data center investments and a potential backdoor for Chinese companies seeking advanced U.S. chips. Securing this access is critical for China to reduce its technological dependence and strengthen its defensive and offensive military capabilities. [2]

However, as the United States increasingly tightens controls on exports of advanced AI chips and technology to China, [3] the burden of compliance is shifting. Governments, customs authorities, data center operators, and logistics companies across Southeast Asia must now demonstrate that these chips are not being diverted to sanctioned or restricted users.

For instance, while a shipment of chips might not be sent directly to China, a Chinese entity could still lease or remotely access the computing capacity these chips provide. Checking the hardware’s geographic destination is no longer sufficient; identifying the ultimate owner, the actual user, and the intended application is what truly matters.

As a result, the U.S. is moving beyond tracking server locations to examining who actually controls them. This initiative is gradually closing the loophole of third-country subsidiaries. [4]

While Southeast Asian governments have shown a willingness to respond by introducing stricter regulations and clearer standards for data privacy, a still gap remains between these complex control requirements and the region's limited domestic enforcement capacity. [5]

Monitoring the use of thousands of processors within a single data center is incredibly complex. It requires regulators to understand chip specifications, corporate ownership structures, lease agreements, and remote-access protocols, necessitating unprecedented coordination across trade, cybersecurity, finance, and law enforcement agencies.

The Cost of Being a “Transit Hub”

It is important to recognize that not every shipment of advanced chips through Southeast Asia is designed to evade export controls. Nations across the region possess legitimate computing needs for e-commerce, financial services, manufacturing, health care, and national AI programs. Consequently, treating every surge in chip imports as evidence of smuggling would yield an unbalanced assessment.

Nevertheless, confirmed or even suspected violations can drastically reshape how Washington views a regional market. Once Washington identifies a country as a weak link, domestic businesses may face complicated licensing procedures, extended delivery times, and heightened regulatory scrutiny.

Because access to advanced chips dictates how data centers operate and what types of facilities can be developed, the AI chip war directly impacts the industrial development strategies of these nations.

However, strict compliance with U.S. requirements carries its own set of economic risks. China remains an important source of capital, telecommunications equipment, digital platforms, and market demand for Southeast Asia. As many Chinese companies expand overseas to escape intense domestic competition and reach international users, applying overly broad screening standards to any entity with ties to China could deter legitimate investments.

Ultimately, this approach could make Southeast Asian countries appear as though they are actively participating in Washington’s strategy of technological containment.

Not Taking Sides, but Taking Responsibility

While Southeast Asian governments often emphasize their refusal to choose between the U.S. and China, the situation is much more complex. The region relies on the Chinese market, yet it simultaneously requires U.S. capital, advanced chips, software, and crucial security alliances.

A growing number of officials and investors also stress the importance of strategic flexibility , diversification, and selecting partners based strictly on national interests rather than superpower alignment. [6]

However, refusing to take a side does not excuse a nation from making important choices. Approving a data center project, issuing a chip import license, or accepting a specific corporate ownership structure all carry strategic consequences.

Because digital infrastructure is built for longevity, the financial cost of switching to a different ecosystem once technical standards and data governance systems are established is substantial.

Although major powers often frame their demands as purely technical or legal choices, it is the third countries that bear the resulting political and economic burdens. The U.S. certainly has the right to control the export of its technology. Yet, as these controls expand to scrutinize ownership and remote computing services in third countries, the boundary between protecting domestic technology and dictating another nation's regulatory environment blurs.

Conversely, Chinese efforts to access technology through intermediary entities or opaque ownership structures—even if legally compliant—arouse suspicion and force host countries to launch internal investigations.

Hence, Southeast Asia’s continued autonomy relies on its ability to demonstrate that its regulatory frameworks will not be exploited to circumvent international rules.

A Narrow Path Forward for Southeast Asia

Southeast Asia can continue to attract major investments, but the practical limits of its technology choices are largely dictated by Washington and Beijing.

The U.S. remains a vital economic partner for ASEAN nations, yet as U.S.-China competition reshapes the region, China increasingly holds the advantage. [7]

This stronger position stems from China's deeply intertwined regional interests; it stands as Southeast Asia’s largest external trading partner and a major source of investment, technology transfers, and skilled labor. [8]

Despite these challenges, Southeast Asia still possesses a path forward. To navigate this landscape, regional governments must treat decisions regarding data centers and AI infrastructure as core components of their national economic and security strategies. This approach requires governments to make deliberate choices about the types of investment they attract and the compliance standards they are prepared to uphold. [9]

Furthermore, Southeast Asian countries must strengthen their export controls and end-use verification processes. [10] This is essential not only for satisfying Washington’s requirements but also for safeguarding the region's long-term reputation as a secure destination for technology and investment.

Finally, by harnessing new technologies and exchanging expertise with developed nations, governments should invest heavily in building their technical and institutional capacities. Doing so will empower them to independently verify corporate ownership and technology usage, thereby reducing their reliance on external guidance or pressure.

Bùi Minh Tuyền wrote this article in Vietnamese and published it in Luật Khoa Magazine on July 17, 2026. The Vietnamese Magazine owns the copyright for this English translation.

References: +

1. Walker, R. (2026, July 5). Between the superpowers: Southeast Asia’s strategic supply chain dilemma. Lowy Institute . https://www.lowyinstitute.org/publications/between-the-superpowers-southeast-asia-s-strategic-supply-chain-dilemma

2. Chan, K. (2026, April 16). Competing AI strategies for the US and China. Brookings Institution . https://www.brookings.edu/articles/competing-ai-strategies-for-the-us-and-china/

3. Power, J. (2026, June 1). US says ban on AI chip shipments applies to Chinese firms outside China. Al Jazeera . https://www.aljazeera.com/economy/2026/6/1/us-says-ban-on-ai-chip-shipments-applies-to-chinese-firms-outside-china

4. Mako, G. (2026, July 8). The US-China AI chip war: Southeast Asia’s compliance dilemma. Eco-Business . https://www.eco-business.com/opinion/the-us-china-ai-chip-war-southeast-asias-compliance-dilemma/

5. Lee, J. (2026b, April 23). China’s plan to win the AI race in Southeast Asia. Hudson Institute . https://www.hudson.org/innovation/chinas-plan-win-ai-race-southeast-asia-john-lee

6. Reuters. (2026, July 9). Asia seeks strategic flexibility amid US-China rivalry. https://www.reuters.com/world/china/asia-seeks-strategic-flexibility-amid-us-china-rivalry-2026-07-09/

7. Lee, J. (2026a, April 21). Southeast Asia and Chinese technology “going abroad”. Asia Society Policy Institute . https://asiasociety.org/policy-institute/southeast-asia-and-chinese-technology-going-abroad

8. Lee, J. (2025, October 28). The AI-robotics revolution, China-US rivalry and Southeast Asia. Fulcrum . https://fulcrum.sg/the-ai-robotics-revolution-china-us-rivalry-and-southeast-asia/

9. Mako, G. (2026, July 8). The US-China AI chip war: Southeast Asia’s compliance dilemma. Eco-Business . https://www.eco-business.com/opinion/the-us-china-ai-chip-war-southeast-asias-compliance-dilemma/