KUALA LUMPUR (April 4): Malaysia is emerging as a hotspot for semiconductor factories, as US-China tensions prompt companies to diversify operations.
In a report on Wednesday, CNBC quoted Kenddrick Chan, the head of the digital international relations project at LSE IDEAS, the foreign policy think tank of the London School of Economics and Political Science, as saying that Malaysia has well established infrastructure, with around five decades of experience in the ‘back end’ of the semiconductor manufacturing process, particularly in assembly, testing and packaging.
Semiconductors — critical components found in everything from smartphones to automobiles — have been at the centre of a US-China technology war.
American chip giant Intel said in December 2021it will invest more than US$7 billion (RM33.18 billion) to build a chip packaging and testing factory in Malaysia, with production expected to begin in 2024.
“Our decision to invest in Malaysia is rooted in its diverse talent pool, well established infrastructure, and robust supply chain,” Aik Kean Chong, Intel Malaysia’s managing director, told CNBC.
Intel’s first overseas production facility was an assembly site in Penang launched in 1972 with a US$1.6 million investment. The company went on to add a full test facility, as well as a development and design centre in Malaysia.
Another US chip giant, GlobalFoundries, in September opened a hub in Penang to “support global manufacturing operations”, alongside its plants in Singapore, the US and Europe.
“The forward-thinking policies and strong support from the regional government, together with partners like InvestPenang, have built a strong ecosystem for the industry to thrive,” said Tan Yew Kong, a senior vice-president and general manager of GlobalFoundries Singapore.
Germany’s top chipmaker Infineon in July 2022 said it will build a third wafer fabrication module in Kulim, while Neways, a key supplier to Dutch chip equipment maker ASML, said last month it will construct a new production facility in Klang.
“Malaysia’s edge has always been its skilled labour in packaging, assembly and testing, and lower comparative operating costs, making exports more competitive globally,” said Yinglan Tan, a founding managing partner of Insignia Ventures Partners. He added that the ringgit’s current position makes the country an “attractive location for foreign players”.
Malaysia holds 13% of the global market for chip packaging, assembly and testing services, said the Malaysian Investment Development Authority in a Feb 18 report. Exports of semiconductor devices and integrated circuits increased by 0.03% to US$81.4 billion in 2023, amid global chip demand weakness.
Meanwhile, Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai said many Chinese firms had diversified their production to Malaysia, calling the country China’s “plus one”.