Washington is preparing to crack down on the Southeast Asian middlemen funneling restricted American AI chips into China — bad news for Chinese tech firms and for chipmakers with loose compliance rules.

• Chinese companies barred from buying advanced US chips are getting them anyway through shell companies and resellers in Malaysia, Thailand, Vietnam, and Singapore.
• Senators Jim Banks and Elizabeth Warren pressed Commerce Secretary Howard Lutnick to treat the rerouting as a national security problem, citing a case where billions of dollars of Nvidia-powered AI servers were shipped to China through Singapore.
• Congress says enforcement is far weaker than it should be, with American chipmakers leaning on self-policing and doing minimal checks on who their customers really are.
• AMD, Analog Devices, Intel, and Texas Instruments were singled out for compliance policies that fall short of Commerce Department guidance.
• The Commerce Department wants to nearly double the budget of its export enforcement arm and add hundreds of investigators, including officers posted overseas.

Outlook: Expect tighter enforcement and more cooperation from Malaysia and Singapore, which have both signaled they will help shut the transit routes down.