KUALA LUMPUR (Oct 31): Malaysia's semiconductor industry remains resilient, notwithstanding escalating tensions between the US and China, but still lags in advanced pattern development as its integrated circuit (IC) design remains negligible, World Bank Malaysia lead economist Dr Apurva Sanghi has cautioned.

At the RAM Forum 2023, Apurva said that Malaysia’s semiconductor sector, which contributes nearly 25% of the country’s gross domestic product (GDP), continues to thrive and play a crucial role in the nation's economic stability but warned it needs to move up the value chain if it is to continue to benefit in the longer run.

“The classic thing is when the elephants fight, the philosophy is scramble. But I think for Malaysia, it is a bit of an exception, and there is one bright spot or [a] silver lining, and that is the semiconductor industry,” said Apurva.

“The result of these elephants fighting [is that] semiconductor exports from Malaysia to both the US and China have increased.

“Malaysia, as of now, at least in the short term, is benefiting from the fighting elephants,” he said.

Yet, beyond the short-term gains, a more profound concern looms over Malaysia's semiconductor sector, warned Apurva.

Despite holding an impressive 8% share of semiconductors in the global market, Malaysia still lags in advanced pattern development as its integrated circuit (IC) design is only 0.07% within the semiconductor industry.

“Malaysia has not been able to move the semiconductor value chain from low to high. It's still stuck in assembly and testing and has not been able to do the design and development,” he said.

“These are long-term structural issues that need to be addressed if the semiconductor industry wants to keep benefiting,” he added.