This article first appeared in The Edge Malaysia Weekly on June 2, 2025 - June 8, 2025
DESPITE US President Donald Trump calling for an end to the subsidies made available under his predecessor Joe Biden’s CHIPS and Science Act, the law’s rippling effects are already felt in Penang, Malaysia’s semiconductor assembly and testing hub.
The CHIPS — or Creating Helpful Incentives to Produce Semiconductors — Act is a legislative gambit designed to repatriate semiconductor manufacturing and shore up national supply chain resilience. The US set aside US$52 billion for subsidies, comprising US$39 billion for chip foundries focused on advanced technologies, US$2 billion to support legacy chip production and US$11 billion dedicated to research and development (R&D) as well as workforce development.
This prompted major chipmakers to ramp up their US presence, announcing multibil-dollar investments aligned with the CHIPS Act’s objectives.
Semiconductor giant Micron Technology Inc secured US$6.1 billion in funding from the US Department of Commerce to support its planned US$125 billion construction of new fabrication plants in New York and Idaho.
Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chip maker, is also a key beneficiary, receiving US$6.6 billion in grants to build three semiconductor fabrication plants in Arizona. The company has planned investments of US$65 billion in Arizona to build three advanced wafer fabs. The first has started production, while the second and third are expected to begin production by 2028 and 2030 respectively.
In March, TSMC announced it would spend an additional US$100 billion in the US, bringing the total investment to US$125 billion. The expansion includes plans for three fabrication plants, two advanced packaging facilities and a major R&D team centre, solidifying the project as the single-largest foreign direct investment in US history.
Beyond fabrication, Amkor Technology Inc, one of the world’s largest providers of outsourced semiconductor assembly and test services (OSAT), is investing US$2 billion to establish an advanced semiconductor packaging and test facility in Arizona, further enhancing the US semiconductor value chain. It has received US$400 million in direct funding under the CHIPS Act for the planned investment.
Even Nvidia Corp, which specialises in graphics processing units (GPUs) and AI and high-performance computing, has unveiled new investments in the US. In April this year, the company revealed plans to build AI servers worth up to US$500 billion in the US over the next four years. At about the same time, Advanced Micro Devices Inc (AMD), one of the largest providers of personal computer chips, announced that its CPU chips would be produced at TSMC’s new Arizona plant, marking the first time AMD products would be manufactured on US soil.
These developments mark the beginning of a fundamental realignment in the global semiconductor supply chain as geopolitical tensions and supply chain vulnerabilities exposed by the Covid-19 pandemic prompt countries to bolster national chipmaking capabilities. The world is witnessing a shift in production to be closer to the end markets, particularly in the US and its allies.
The Semiconductor Industry Association estimates that within a decade from the enactment of the CHIPS Act, the US will triple its domestic semiconductor manufacturing capacity. This 203% expansion in US fab capacity is the largest projected increase in the world at this time.
What does this “onshoring” phenomenon, driven by geopolitical tensions and the pursuit of greater self-reliance in critical technologies, mean for Malaysia?
As one of the world’s most important back-end semiconductor hubs, the country has long been a critical node in the global chip ecosystem, accounting for about 13% of global back-end semiconductor output. The country plays a vital role in assembly, packaging and testing — functions that remain essential even as front-end fabrication is being reshored to the US.
“The relocation of front-end fabs and high-value R&D to the US, coupled with intensifying competition from countries like Vietnam and India, which are offering aggressive incentives and greater scale to attract high-value-added activities, indeed poses a significant challenge to Malaysia,” Datuk Loo Lee Lian, CEO of InvestPenang, tells The Edge in an email.
At the same time, this transition presents a new opportunity for Malaysia, particularly in areas where it already has an advantage.
“Nonetheless, Malaysia can play a significant role in this global supply chain shift. Leveraging more than 50 years of industrial excellence, the country is well positioned as a reliable, neutral and cost-effective manufacturing hub, especially in the outsourced assembly and test segment,” she adds.
Loo is optimistic that Malaysia can solidify its role as a critical node in the rebalanced global semiconductor ecosystem, in particular with a focus on execution. She calls for the expediting of the implementation of the National Semiconductor Strategy (NSS) to drive the development of high-value-added activities identified, including integrated circuit (IC) design, advanced packaging and manufacturing equipment.
Launched in 2024, NSS is Malaysia’s ambitious road map to elevate its role in the global semiconductor industry beyond traditional back-end assembly and testing. This includes moving into higher-value activities like IC design and advanced packaging, fostering local champions, and developing a highly skilled talent pool. To achieve this, the strategy includes attracting at least RM500 billion in investments during its first phase.
Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai is of the view that Malaysia is well positioned with a complete ecosystem, ranging from infrastructure to talent base, making the country an investment destination of choice in the semiconductor field.
“The high-end wafer fab reshoring doesn’t really impact us because Malaysia is not involved in high-end technology nodes. But we need to attract [players] somewhere in the middle node technologies to invest in Malaysia,” says Wong, adding that the fabrication plants producing the most advanced microchips are too costly.
In contrast, mid-range wafer fabrication — between 18nm and 40nm — is seen as more economically viable, he notes.
“We need a wafer fab so that we can create the ecosystem for fabs. We already have the assembly and test ecosystem. Now, we are trying to create another ecosystem,” says Wong in response to questions from The Edge.
Both Loo and Wong emphasise that to remain globally competitive, Malaysia must double down on talent development and innovation, accelerate regulatory approvals, and foster international partnerships to enhance capabilities.
“Moving forward, to stay relevant and competitive, Malaysian players must leverage the National Semiconductor Strategy to move up the value chain through investments in IC design, advanced packaging and manufacturing equipment, while forging deeper partnerships with multinational corporations to become their tier-1 supplier,” says Loo.
“Malaysia must take proactive steps to strengthen its investment climate. This includes enhancing the ease of doing business by streamlining regulations and accelerating approval processes to attract and retain investments, stabilising the cost of doing business to ensure competitiveness, investing and building highly skilled STEM and engineering talent to support high-value-added activities and strengthening the value chain to reinforce supply chain resilience and ‘stickiness’.”
Ultimately, the CHIPS Act may be reshaping where chips are made, but Malaysia can still play a key role in how they are made — if it plays its cards right.
At COMPUTEX 2025 in Taipei last month, Nvidia co-founder and CEO Jensen Huang described the rise of AI as becoming as essential as the internet and electricity.
“We are at the beginning of a new industry that builds AI factories. The world is going to have AI infrastructure all over … Simultaneously, the world needs to have more manufacturing resilience and diversification, which will be distributed around the world, including the US, which will be doing some of it,” he said at the annual technology trade show.
“It’s impossible to do all the manufacturing onshore, and it’s also unnecessary. But we should do as much as we can for the importance of national security, while having resilience and redundancy around the world.”
From Taiwan’s viewpoint, there is anxiety over the US reshoring of high-end semiconductor capacity. As this global shift towards onshoring gains momentum, it brings significant challenges, especially for economies like the US that have undergone decades of deindustrialisation and face higher production costs.
“It introduces cost inefficiencies — the US has deindustrialised for decades and simply cannot match Taiwan’s manufacturing economics,” Dr Jeremy Chang Chih-Cheng, CEO and research fellow for the Research Institute for Democracy, Society, and Emerging Technology (DSET), tells The Edge in an interview.
According to Chang, Taiwan’s semiconductor edge was not the result of strategic geopolitical planning but decades of government and private sector-driven growth. Now, with semiconductors becoming strategic assets, governments are intervening more forcefully.
“The original logic was simple: efficiency and cost effectiveness in a borderless world. But the escalation of US-China rivalry — starting with the Trump era and intensifying through the pandemic and into the AI revolution — has shifted that logic entirely. Semiconductors are no longer just business components, they are strategic assets tied to national security and geopolitical power,” he says.
“Now, countries that once deindustrialised are racing to bring chip production back home. The US, Japan and Europe are subsidising capacity, seeking to hedge against supply chain risks and reduce dependence on Asia. This poses a structural challenge for Taiwan, which must now adapt to a new paradigm where business decisions are heavily influenced by politics.”
In response to this changing environment, Taiwanese companies now need to be flexible, resilient and fast-moving. Nonetheless, Chang remains optimistic that the global semiconductor market is growing rapidly, offering growth opportunities.
This expanding market offers opportunities for Malaysia to carve out a niche and even expand it, particularly in back-end assembly, testing and middle node technologies fabrication.
There are 105 semiconductor fabs scheduled to be built globally between 2024 and 2028, with 84 already progressing through installation, construction or operation, says Ajit Manocha, president and CEO of SEMI, the global semiconductor industry association, in his opening remarks at the 30th Semicon Southeast Asia Convention in Singapore last month.
Significantly, 80 of these fabs are in Asia, but only six are in Southeast Asia. According to Ajit, there is a strong opportunity to attract more fabs to this region.
“If we calculate the revenue based on the number of wafers out per fab, 105 fabs still do not give us US$1 trillion in revenue by 2030. That means there will be 30-plus additional fabs in 2028 and 2030. That’s what I call opportunities,” he said.
As global demand for chips surges alongside emerging technologies such as AI and quantum computing, Malaysia stands at a crossroads. However, with the right policies and partnerships, it can transform these unprecedented challenges into long-term opportunities for growth.
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