In response to escalating tensions between the United States and China, Malaysia has emerged as a focal point for semiconductor manufacturing, attracting major investments from global giants.
The strategic move comes as companies seek to diversify their operations and reduce dependence on traditional manufacturing centers.
According to CNBC, LSE IDEAS, Head of the Digital International Relations Project, Kenddrick Chan highlighted Malaysia’s well-established infrastructure and decades of experience in the semiconductor industry’s “back end” processes such as assembly, testing, and packaging.
Leading the charge, American chip giant Intel announced plans to invest over $7 billion in building a chip packaging and testing facility in Malaysia, with production slated to commence in 2024.
Intel Malaysia’s managing director, Aik Kean Chong cited Malaysia’s diverse talent pool, infrastructure, and robust supply chain as key factors driving the decision.
Intel’s commitment to Malaysia traces back to 1972 when it established its first overseas production facility in Penang, laying the foundation for subsequent expansions.
Following suit, GlobalFoundries inaugurated a hub in Penang to bolster its global manufacturing operations, emphasizing the region’s conducive environment for the semiconductor industry.
Germany’s Infineon and Dutch chip equipment maker ASML’s supplier, Neways, also announced plans to establish manufacturing facilities in Malaysia, capitalizing on the country’s skilled labor and competitive operating costs.
Malaysia’s semiconductor prowess is underscored by its 13% share of the global market for chip packaging, assembly, and testing services, as reported by the Malaysian Investment Development Authority.
Despite global chip demand weaknesses, Malaysia’s exports of semiconductor devices and integrated circuits witnessed steady growth.
In response to the evolving landscape, Malaysia’s Investment, Trade, and Industry Minister, Zafrul Aziz, articulated the nation’s ambition to focus on the “front end” of chip manufacturing, complementing its existing strengths in the “back end” processes.
To foster the semiconductor ecosystem further, Malaysia established a national semiconductor strategic task force in January, signaling its commitment to attract investments and spur innovation in the sector.
Meanwhile, amidst the shifting dynamics of the U.S.-China tech war, countries like India and Japan are also vying to become major semiconductor hubs.
India approved the construction of three semiconductor plants with investments exceeding $15 billion, while Japan welcomed TSMC’s first factory as part of its diversification efforts.
However, Malaysia grapples with a brain drain challenge as skilled workers seek better opportunities abroad, raising concerns about sustaining the industry’s growth momentum.
Malaysian Prime Minister Anwar Ibrahim has expressed intentions to entice skilled Malaysians to return and contribute to the nation’s semiconductor ecosystem.
As Malaysia solidifies its position as a semiconductor powerhouse, the global tech landscape undergoes a transformative shift driven by geopolitical tensions and strategic diversification initiatives.
