Malaysia’s Ambitious Semiconductor Plan: A $107 Billion Gamble

Malaysia aims to become a key player in the global semiconductor supply chain through its National Semiconductor Strategy (NSS), targeting over MYR500 billion in investments. The strategy focuses on transitioning from assembly to higher-value sectors, attracting foreign investments, training engineers, and supporting local tech startups amidst an evolving geopolitical landscape.

Malaysia is undertaking a bold initiative to become a leading player in the global semiconductor supply chain. In May 2024, Prime Minister Anwar Ibrahim unveiled the National Semiconductor Strategy (NSS), which aims to attract over MYR500 billion (approximately $107 billion) in public and private investments to elevate the country’s position in semiconductor manufacturing and design, as reported by Reuters.

Traditionally, Malaysia has been known for back-end processes in the semiconductor industry, including assembly, testing, and packaging. Major tech players such as Intel and Infineon have had operations there, benefiting from the country’s stable infrastructure and skilled labor attraction. The NSS represents a major shift in focus, pushing for advancements in chip design, cutting-edge packaging techniques, and research and development initiatives, according to ASEAN Briefing.

This strategic pivot aligns with a broader trend among global technology powers racing to secure their semiconductor capabilities amid rising geopolitical tensions. With Malaysia’s neutral stance in US-China relations, it uniquely positions itself as a viable alternative for companies looking to diversify sourcing away from Taiwan and mainland China, reports The Diplomat.

At the heart of the NSS is an extensive fiscal incentive framework aimed at attracting both foreign and local investors. The government has committed MYR25 billion (around $5.3 billion) in incentives, which include tax exemptions, grants, matching investments, and enhanced support for land and infrastructure, according to Free Malaysia Today.

Alongside these incentives, the Malaysian Investment Development Authority (MIDA) is actively courting semiconductor giants from the United States, Europe, and Japan. Significant expansions, such as Intel’s $7 billion investment in Penang and Infineon’s €5 billion plan to boost its power semiconductor capacity in Kulim, reflect the strategy’s potential efficacy, as reported in TIME.

Recognizing that financial investment alone cannot overcome a skills shortage, Malaysia is also prioritizing workforce development. The NSS aims to train and enhance the skills of 60,000 engineers to meet modern semiconductor manufacturing needs, as emphasized by Malay Mail. The approaches will include updated university curriculums, technical certification programs, and partnerships with firms like ARM and Synopsys for practical training.

The Ministry of Higher Education is also promoting “dual-training systems” that blend classroom learning with factory exposure—an effort aimed at not just addressing the existing skills gap but also tackling brain drain by offering competitive salaries for top engineers, according to KR Asia.

An essential goal of the NSS is to nurture a minimum of 10 homegrown companies specializing in advanced packaging and integrated circuit design. It is projected that these firms could generate revenues ranging between MYR1 billion and MYR4.7 billion (approximately $210 million to $1 billion) by 2030. To aid this endeavor, Khazanah Nasional and other government-linked investors are forming funding pools to support local deep tech startups while also promoting the commercial use of university research in relevant fields, reports Digital News Asia.

Malaysia’s strategic geographic position between East and West Asia, along with its neutral foreign policy, enhances its appeal as a semiconductor manufacturing hub. The country has developed robust infrastructure, competitive power rates, and logistical strengths in key regions like Penang, Johor, and Sabah, all critical for a fast-paced industry, highlights The Diplomat.

Moreover, Malaysia’s established membership in ASEAN and participation in regional trade agreements such as RCEP and CPTPP bolster its attractiveness within the regional semiconductor framework. Rather than competing against titans such as Taiwan or South Korea, Malaysia’s NSS promotes a cooperative approach, encouraging cross-border R&D initiatives and seeking foreign partners for investment in innovation hubs, as noted by Free Malaysia Today.

As more tech companies prioritize sustainability, Malaysia is also working toward aligning its manufacturing practices with environmental goals, including the adoption of renewable energy in semiconductor factories, particularly highlighted by TIME.

Looking ahead, Malaysia’s planned trajectory under the NSS encounters challenges from established semiconductor powerhouses and emerging competitors like India and Vietnam. Ultimately, the success of this strategy hinges on the Malaysian government’s ability to develop talent, maintain investor confidence, and foster innovation domestically. By heavily investing in its semiconductor sector, Malaysia demonstrates a commitment to technological independence, underlining its intent to ultimately secure a significant role in the global semiconductor race.

In summary, Malaysia is making a concerted effort to pivot from a historical focus on back-end assembly processes in semiconductor manufacturing to becoming a robust player in higher-value sectors such as design and advanced technology. The National Semiconductor Strategy aims to attract significant investments while developing a skilled workforce and fostering homegrown enterprises. The country’s unique geopolitical positioning combined with its strong infrastructure supports this ambitious plan to emerge as a formidable force in the global semiconductor supply chain.

Original Source: www.intellinews.com