This is such a big change for many future and potentially existing holders of SMM2H that I think it merits a new thread.
Thanks to @Nemodot for bringing this to our attention.
The January 2023 issue of Expat Magazine says that the latest approval letters from Sarawak Immigration declare that SMM2H holders are not allowed to live in other states, i.e. they must live in Sarawak rather than Peninsular Malaysia.
Now there is a new national Government in Malaysia and it may be that the new policy will not be implemented, but the situation is unclear at the moment. One SMM2H agent commented "Yes it is true but we don't know the implication of it. And how they are going to enforce the new clause. Until then it remains the status quo."