Chinese semiconductor design companies are reportedly seeking Malaysian firms to assemble high-end chips, specifically graphics processing units (GPUs), to mitigate risks in case the US expands sanctions on China’s chip industry, according to sources.

China has been granted assembly requests for high-end GPUs, which are not subject to U.S. restrictions, and some contracts have already been agreed. The US is attempting to restrict China’s access to these GPUs, which could be used for artificial intelligence, supercomputers, and military applications, citing confidentiality agreements.

Chinese semiconductor design firms are struggling to secure advanced packaging services due to sanctions and an AI boom. Some are interested in advanced chip packaging services, which can improve chip performance and is emerging as a critical technology in the semiconductor industry.