This article first appeared in The Edge Malaysia Weekly on May 5, 2025 - May 11, 2025

AS geopolitical tensions between the US and China continue to disrupt global supply chains, Taiwan-based Advanced Semiconductor Engineering Inc (ASE Inc) — the world’s largest outsourced semiconductor assembly and test (OSAT) player — is doubling down on Malaysia with the opening of its fifth plant in Penang.

Officially launched in mid-February, the new facility in Bayan Lepas reflects ASE Inc’s long-term strategy to deepen its presence in Southeast Asia, where demand for advanced chip packaging and testing is growing as the region climbs the semiconductor value chain.

While some industry players have looked to diversify away from Taiwan, the reality is that advanced chipmaking capabilities remain highly concentrated in the self-ruled island.

Similarly, when it comes to back-end processes such as assembly, packaging and testing, Malaysia — particularly Penang — continues to offer depth, experience and a mature support ecosystem that regional peers like Thailand and Vietnam have yet to replicate.

For ASE Inc, which has been operating in Malaysia over the past 34 years through ASE Electronics (M) Sdn Bhd (ASE Malaysia), the latest expansion is more than just scaling up capacity — it is a bet on the country’s growing role as a regional semiconductor hub and a response to evolving global trade dynamics.

According to Lee Kwai Mun, the president of ASE’s Southeast Asia operations, semiconductors are no longer a “good-to-have” — they are a must-have. While challenges and headwinds persist, the Taiwanese OSAT giant remains unfazed.

“Apollo 11, the space flight that landed the first humans on the moon in 1969, had less processing power than today’s average smartphone. Today, semiconductors are powering everything from smartphones to vehicles — making them essential to modern life,” he tells The Edge in an exclusive interview in Penang.

Lee, who oversees ASE Inc’s manufacturing facilities in Penang, Malaysia and Singapore, acknowledges that the ongoing US-China trade war is “very fluid”, and therefore, nobody can predict what will happen next.

“There were a lot of announcements on tariffs, but also some pullbacks. But one thing is for sure, the consumption of integrated circuits (ICs) will continue to increase. Yes, with tariffs and the trade war, certain prices might go up, but these factors will not stop the consumption of semiconductors. The tariffs might impact certain countries’ cost of production, but the demand for ICs is not likely to go down,” says the former Intel engineer.

Between May 1999 and February 2006, Lee served as the general manager of ASE Singapore, where he expanded the company’s footprint in the region.

He pointed out that there was previously a “No China, No Taiwan” trend, which saw semiconductor manufacturers shifting production out of China and Taiwan. “But after a while, they figured out that Taiwan is the only place that can build the Nvidia Corp chips and the super advanced ICs. Today, only Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and ASE Inc have the technological capabilities to support Nvidia. So, how can they pull out from Taiwan?”

Similarly, he says, Penang has over 50 years of experience in the electrical & electronics (E&E) sector, supported by the multinational corporations (MNCs) around the world.

“Thailand and Vietnam are trying to do what Malaysia is doing, but it is not something that they can duplicate easily. I think Malaysia will continue to attract MNCs and the country will continue to be a strong magnet,” says Lee.

He observes that the global E&E supply chain has become so deeply intertwined that companies have limited room to manoeuvre. For advanced chip fabrication, Taiwan remains indispensable. For assembly and testing, Penang is the destination of choice.

“Of course, relatively speaking, Malaysia’s position is not as strong as Taiwan’s, but it is also not easily replaced. Taiwan’s cluster is stronger, with all the supporting players, from speciality chemicals to equipment, ready to support TSMC within an hour. Similarly, Penang has a strong OSAT and ATE (automated test equipment) ecosystem supporting each other,” Lee says.

ASE Malaysia’s new chip packaging and testing facility is part of its strategic expansion plan that will expand its floor space to about 3.4 million sq ft.

For perspective, ASE Malaysia currently operates with one million sq ft of floor space, and the addition of its fourth and fifth plants contributes another one million sq ft. It has a planned future phase expansion of 1.4 million sq ft.

“ASE Inc’s total cumulative investment in Penang and Malaysia since inception — including ongoing expansions over the next few years — will come up to around RM10.7 billion. Meanwhile, the investment outlay for Plant 4 and Plant 5 amounts to about RM3 billion,” says Lee.

ASE Malaysia’s fourth and fifth plants will be fully operational in the next three to five years.

“The new facility in Penang will enhance factory automation and build on ASE’s strong IC packaging and testing capabilities in Bayan Lepas Free Industrial Zone, particularly for wire bond package types.

“With this new expansion, ASE Inc will be able to provide customers with a broader range of advanced manufacturing solutions and greater flexibility in choosing manufacturing locations closer to their key markets,” he says.

Lee adds that there are also plans for the construction of new facilities in the Bayan Lepas area, with future developments to be guided by market needs.

ASE Inc is a global provider of semiconductor manufacturing services in packaging and testing. The company was co-founded by brothers Jason Chang Chien-Sheng and Richard Chang Hung-Pen in 1984. The pair rank as the sixth richest in Taiwan, with a combined net worth estimated at US$7.8 billion (RM33.65 billion).

Originally from Shanghai, the Chang brothers relocated to Taiwan following the 1949 revolution in mainland China. The family first built its wealth through real estate ventures before branching out into the technology sector.

Notably, ASE Inc is a member of ASE Technology Holding Co Ltd (ASEH), which is listed on the Taiwan Stock Exchange and the New York Stock Exchange through the issuance of American Depositary Receipts.

Year to date, ASEH’s stock price has declined by about 16% to settle at TWD135.50 on Wednesday (April 30), giving it a market capitalisation of TWD598.77 billion (RM80.56 billion). The counter is currently trading at a historical price-earnings ratio of around 18 times.

Other than controlling OSAT giant ASE Inc, ASEH also holds majority interests in System-in-Package technology specialist USI Inc, as well as back-end chip packaging turnkey solutions provider Siliconware Precision Industries Co Ltd, allowing the group to combine their strengths and derive synergies.

Apart from its flagship factory in Kaoh­siung, ASE Inc also operates global manufacturing facilities, spanning 18 locations in Malaysia, South Korea, Japan, the Philippines, Singapore and the US. Globally, the group has a workforce of 65,000 employees.

With the semiconductor market on track to reach US$1 trillion in revenue by 2030, OSAT manufacturing remains critical to the global electronics supply chain. ASE Inc commanded a 30% share of the global OSAT market in 2023.

Lee opines that ASE Malaysia’s expansions will continue to help ASE Inc to meet growth momentum across a broad range of end markets, including fifth generation (5G), artificial intelligence (AI), automotive and high-performance computing.

“ASE Malaysia will be investing in these areas to prepare for the next big wave. Our method has always been investing ahead of the curve,” he says.

ASE Malaysia — ASE Inc’s first overseas venture — has been serving major semiconductor companies since 1991. Currently, the Malaysian unit employs some 3,300 people. The facility expansion is expected to have greater hiring, as well as training and development needs, with an additional 1,500 employees over the next few years.

It is worth noting that ASE Malaysia is ramping up two main products, namely image sensor and power management integrated circuit (PMIC).

“Today, 90% of our image sensors go into the automotive sector, basically for the car cameras. As for PMIC, which is an integrated circuit (IC) for power management, it is being used to control the flow and direction of electrical power. Today, many ICs go into data centres, automotive and electrical appliances,” says Lee.

In addition, ASE Malaysia is also involved in other standard products such as microprocessors, which the company had been building over the past 30 years.

“This business segment is still growing but its growth rate is relatively slower,” he says.

Here in Penang, ASE Malaysia does not build the most advanced, complex chips — such as Nvidia’s — which are handled by its sister plant in Kaohsiung.

Lee, however, sees tremendous opportunity in the edge devices that support those AI chips. “I believe the next super cycle in semiconductors could be driven by humanoid and industrial robots, both of which require a high volume of edge components to function — much like how autonomous vehicles rely on sensors to detect proximity and avoid contact.

“Every powerful AI chip will depend on thousands of such devices. That is where ASE Malaysia fits in. We expect these opportunities to materialise as early as 2026.” 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.