Malaysia emerges as a hotspot for semiconductor firms amid U.S.-China chip tensions

Malaysia is emerging as a hotspot for semiconductor factories as U.S.-China tensions prompt firms to diversify functions.

“Malaysia has perfectly-proven infrastructure with close to five a long time of practical experience in the ‘back end’ of the semiconductor producing process, specially in assembly, screening and packaging,” explained Kenddrick Chan, head of the electronic global relations venture at LSE Suggestions, the international plan feel-tank of the London University of Economics and Political Science.

Semiconductors – crucial elements found in every little thing from smartphones to cars – have been at the centre of a U.S.-China technologies war.

American chip big Intel in December 2021 said it will invest much more than $7 billion to construct a chip packaging and tests manufacturing unit in Malaysia, with output envisioned to start out in 2024.

“Our conclusion to commit in Malaysia is rooted in its assorted expertise pool, properly-set up infrastructure, and strong supply chain,” Aik Kean Chong, Intel Malaysia’s taking care of director, advised CNBC.

Intel’s very first overseas production facility was an assembly internet site in Penang released in 1972 with a $1.6 million financial commitment. The business went on to add a entire test facility as properly as a advancement and design heart in Malaysia.

Yet another U.S. chip big, GlobalFoundries, in September opened a hub in Penang to “aid international manufacturing functions” along with its plants in Singapore, the U.S. and Europe.

“The ahead-contemplating procedures and robust help from the regional governing administration jointly with companions like InvestPenang have constructed a robust ecosystem for the sector to thrive,” stated Tan Yew Kong, senior vice president and common supervisor of GlobalFoundries Singapore.

Germany’s top chipmaker Infineon in July 2022 reported it will develop a 3rd wafer fabrication module in Kulim even though Neways, a essential provider to Dutch chip equipment maker ASML, claimed final thirty day period it will assemble a new generation facility in Klang.

“Malaysia’s edge has often been its qualified labor in packaging, assembly and screening, and decreased comparative running expenditures, building exports extra competitive globally,” stated Yinglan Tan, founding running partner at Insignia Ventures Associates. He extra that the ringgit’s present posture can make the nation an “eye-catching locale for foreign players.”

Malaysia holds 13% of the world-wide market place for chip packaging, assembly and testing companies, mentioned the Malaysian Expenditure Advancement Authority in a Feb. 18 report. Exports of semiconductor gadgets and built-in circuits greater by .03% to 387.45 billion Malaysian ringgit ($81.4 billion) in 2023, amid world-wide chip demand weak point.

Malaysia Semiconductor Industry Affiliation president Datuk Seri Wong Siew Hai explained a lot of Chinese corporations diversified some of their manufacturing to Malaysia, calling the nation China’s “in addition one.”

Zafrul Aziz, Malaysia’s expense, trade and industry minister, advised CNBC in January that Malaysia aims to target on the “front finish” of the chip manufacturing process, in its place of just the “back end.” Entrance finish processes include wafer fabrication and photolithography, though back again stop processes focuses on packaging and assembly.

In a bid to mature the country’s semiconductor ecosystem and draw in investments, Malaysia in January set up a nationwide semiconductor strategic taskforce, local media documented.

In the same way, nations like India and Japan have been courting foreign companies to set up functions on area soil as they goal to come to be big chip hubs along with the U.S., Taiwan and South Korea.

India in February authorised the building of a few semiconductor plants with investments of a lot more than $15 billion. India in June authorised U.S. memory chip big Micron’s ideas to set up a semiconductor unit.

In the exact same month, the world’s largest deal chip maker TSMC opened its first Japan manufacturing unit as it diversifies absent from Taiwan amid U.S.-China tensions.

Washington launched sweeping guidelines in October 2022 aimed at proscribing China’s obtain to advanced chip know-how amid fears that China could use them for armed forces reasons. Final calendar year, the U.S. announced new regulations preventing U.S. chip designer Nvidia from marketing advanced AI chips to China.

“Malaysia and Asia in general is poised to benefit from the China-U.S. tech war, exactly where accessibility to superior semiconductor chips are staying weaponised as a resource to build worldwide technological supremacy,” reported May-Ann Lim, director of the knowledge governance practice at general public coverage consultancy Access Partnership.

Whilst Malaysia stands to reward from the U.S.-China chip war, its brain drain poses challenges as staff go away the nation for improved work prospective clients and higher salaries.

“This could perfectly be the case if providers invest in upskilling the workforce in Malaysia, only to eliminate them to other opponents around the region as soon as they have the expertise,” reported Lim.

An official analyze conducted in 2022 uncovered that 3 out of 4 Malaysian staff in Singapore are proficient or semi-qualified, highlighting the country’s mind drain difficulty.

“No matter whether this desire generated by provide chain diversification will be satisfied with ample supply of expert talent in the state is continue to an ongoing operational obstacle,” explained Tan of Insignia Ventures Partners.

Malaysian Prime Minister Anwar Ibrahim in September reported the government is looking to entice expert Malaysians to return and add to the country.