The transition of communication technology, the advent of the 4th Industrial Revolution phenomenon (Industry 4.0) across a wide range of industries, e-mobility, as well as increasing use of electrical and electronic devices have caused an increase in the demand for semiconductor chips.
Malaysia is one of the main countries in the global semiconductor chain.
Currently, Malaysia accounts for approximately 7 percent of the world’s semiconductor trade where 13 percent of this activity involves the global chip assembly, testing and packaging process (outsourced semiconductor assembly and test – OSAT).
In 2021, E&E exports were RM456 billion, 37% of Malaysia’s total exports. The growth from 1972 to 2022 is a compounded annual growth rate of 16%.
Semiconductors are the largest contributor to the country’s E&E exports, representing 62 percent of the total value of E&E product exports.
Malaysia’s position as a major hub for chip testing and packaging is very important as this is the final stage for semiconductor production. This ecosystem is led by multinational companies (Multinational Companies – MNC) with the participation of local companies in the global supply chain.
This was expressed in a written reply to a question raised by Senator Datuk Teo Eng Tee @ Teo Kok Chee at the Dewan Negara today.
Teo called for an explanation as to the Ministry’s efforts to address the ongoing global semiconductor chip shortage as well as what measures are being taken by the ministry to develop the local semiconductor industry.
In the statement, sighted by Business Today, the Ministry of Trade and Industry (MITI) added that the increased demand follows movement restrictions and border closures around the world to deal with the spread of the COVID-19 pandemic which has contributed to the disruption of the semiconductor supply chain in the global market.
The reopening of borders and economic sectors around the world following the transition to the endemic phase of COVID-19 has led to a dramatic increase in the use of semiconductor chips which has impacted various economic sectors due to the current insufficient supply.
The ministry said efforts are focussed on strengthening the semiconductor industry here to ensure the supply chain is resilient, preserved and sustainable.
In ensuring that the local semiconductor industry remains competitive as part of the global supply chain, MITI has implemented various initiatives including the provision of fiscal incentives in the form of tax exemptions in the form of Pioneer Status or Investment Tax Allowances, the provision of special incentive packages under the Strategic Investment Special Fund, the implementation of programs the development of local suppliers as well as special incentives to encourage the development of the semiconductor ecosystem in the field of integrated circuit (IC) design, IC packaging design, embedded system design, and also test and engineering design for E&E cluster.
In addition, the Malaysian Productivity Corporation (MPC), an agency under MITI in collaboration with the Malaysia Semiconductor Industry Association (MSIA) through the Electrical & Electronic Productivity Nexus (EEPN) also took steps to support the development of the E&E industry through future talent development.
Among the programs implemented are the skills improvement program and workforce reskilling for unemployed Engineers and Technicians as well as the “Academy in Factory (AiF)” program by training SPM school leavers to be employed directly by companies in the E&E sector.
In keeping the supply resilient, the Memorandum of Cooperation on May 10, 2022 between Malaysia and the United States in the semiconductor supply chain or the Memorandum of Cooperation on Semiconductor Supply Chain Resilience contributes to MITI’s efforts in devising an action plan to strengthen the semiconductor supply chain.
This cooperation proves the US recognises Malaysia as one of the main global semiconductors producing countries and Malaysia as a leading semiconductor supplier trading partner to the US market, contributing as much as 24 percent of the United States’ needs.
This partnership with the United States is expected to open up opportunities for the local industry to obtain capital funding and expert energy, as well as strengthen integration in the global semiconductor supply chain, so that the local semiconductor industry remains sustainable.
Additional efforts to strengthen the growth of the semiconductor industry translates into increased investment in this sector. Throughout 2021, MITI through the Malaysian Investment Development Board (MIDA) has approved 94 projects with a total investment of RM148 billion in the E&E industry.
Some 64 percent of this amount, equivalent to RM95 billion in total investment, is from new and expansion projects by multinational companies such as Infineon, Fuji Electric, Intel, Onsemi, Nexperia, AT&S and others.
In the first half of 2022, MIDA has approved 25 semiconductor projects and related products with a total investment of RM9.27 billion.
This amount is 48 percent of the total investment of RM19.36 billion approved for the E&E industry in the period from January to June 2022.
Among the companies that contributed to this investment are TF AMD Microelectronics, Texas Instruments Malaysia and Rohm-Wako Electronics.
