KUALA LUMPUR (March 25): Malaysia must strengthen horizontal linkages among its semiconductor firms and related industries to bolster the country's position in the global supply chain amid growing geopolitical uncertainties and trade tensions, said Deputy Investment, Trade and Industry Minister Liew Chin Tong.

While Malaysia’s semiconductor industry — particularly in Penang — is well-integrated into global supply chains, these connections are predominantly vertical in nature, Liew said in his speech at the launch of the United Local Synergy programme in Penang on Tuesday.

“We have a very strong semiconductor sector, but the semiconductor sector is not horizontally-linked to the automotive, defence industry, medical devices, or agricultural sectors locally," he said.

Liew explained that vertical linkages refer to the traditional supply chain structure, where Malaysian semiconductor firms supply components to multinational corporations without developing broader industry connections within the country.

By contrast, horizontal linkages would see local firms collaborating across various sectors to develop homegrown technology and intellectual property (IP).

“ViTrox [Corp Bhd (KL:VITROX)] is starting something in agriculture, [while] Pentamaster [Corp Bhd (KL:PENTA)] is building its own medical devices manufacturing plant. But what we want to do is to work with you, to build synergy, to build horizontal crossing, and to create a lot more Malaysian intellectual properties and Malaysian technology," he said.

Liew stressed that Malaysia’s goal is not to chase cutting-edge semiconductor technologies but to establish itself as an “indispensable middle” player in the global supply chain.

“That means our semiconductor industry and all other industries powered by our semiconductor technology must be able to fortify a middle position where we are not chasing top technology but where we are very strong in the middle. We can work with the European bloc, US bloc and China bloc, where we provide excellent technology and create Malaysian technology. That’s our hope,” he said.

Liew remarks came amid the shifting in the global trade dynamics which has seen increasing risks of trade restrictions from major economies.

“At some point, the US may wall itself up and say, ‘Okay, you cannot export so many things to me’. This may happen. You are already seeing the signs," he cautioned.

Liew said while Malaysia is still working with multinationals, the country also wants to create its own technology and its own IP, so that it could serve the world.

The newly-launched United Local Synergy programme is an initiative that brings together seven Malaysian companies including in a strategic collaboration aimed at enhancing the local supply chain, driving innovation and expanding Malaysia’s international footprint.

These companies include Greatech Mechatronics, a subsidiary of Greatech Technology Bhd (KL:GREATEC); Aurelius Technologies Bhd (KL:ATECH); Coraza Systems Malaysia Sdn Bhd, a subsidiary of Coraza Integrated Technology Bhd (KL:CORAZA); Berjayapak Sdn Bhd, a subsidiary of L&P Global Bhd (KL:L&PBHD); Swift Bridge Technologies Sdn Bhd; Prodelcon Sdn Bhd and Eng Teknologi Sdn Bhd.

The programme will enable Malaysian companies to develop locally-designed products for the global market, drive growth for participating firms and expand to include more local companies over time.

Malaysia has been making concerted efforts to strengthen its semiconductor and related industries. In May last year, the government launched the National Semiconductor Strategy (NSS), which aims to nurture 10 Malaysian companies with revenue exceeding US$1 billion (RM4.4 billion), as well as 100 firms with turnover of at least RM1 billion within the next decade.

Earlier this month, Malaysia also announced that the government will pay British chip architect Arm Holdings plc, which is owned by SoftBank Group Corp, a total of US$250 million over 10 years for semiconductor-related licences and know-how.