KUALA LUMPUR (Aug 19): During the pandemic when supply chains were disrupted, semiconductor machinery company Applied Materials switched its supply acquisition strategy from sourcing parts when it was needed to ordering extra parts “just in case”.

The old way of operating was focused on efficiency — getting the right part at the exact moment it is needed to assemble it to keep inventory lean. Today, “just in case” means stocking more parts on-site or ensuring its suppliers hold excess inventory for them should a disruption strike.

This strategy, according to Applied Materials regional president for Southeast Asia and Applied Global Services corporate vice-president Brian Tan, prepared the company to build resilience against disruptions, including navigating the Middle East tensions that is happening today.

This is only the beginning, he said, and the supply chain needs to remain resilient, especially since the Middle East conflict remains uncertain. Companies are planning for the future, ensuring that suppliers and the supply chain can support the industry regardless of the disruption.

“What if there is another disruption? Our entire ecosystem and supply chain has since gotten very connected to make sure beyond efficiency, there is supply chain resiliency,” he said.

“Getting our suppliers to ensure there is sufficient stock is one strategy, but the other is making sure our suppliers have alternative sources or locations where they manufacture.”

Tan explained that this secures the company’s manufacturing operations if there is a geographical-based disruption, ensuring that there are alternative factories that are operational and can work with the company in any part of the world.

“This is where Southeast Asia and Malaysia can play such a critical role, a strategy that we have embarked on through Covid-19 until now.”

“We want [our supplier sites] to be very close to [our manufacturing sites], ensuring the shortest possible lead times for transfer.”

Touching on Malaysia, Tan said since the country is known as being geographically strategic for assembly and testing, the country should lean into its existing strength. With the launch of the National Semiconductor Strategy (NSS), Tan said the important thing is for the industry to have clarity and commitment to the strategy.

The success of the NSS relies on strong, long-term commitment to its execution. This entails streamlining local business processes to seamlessly facilitate the establishment of new operations and support the expansion of existing companies already on the ground, thereby allowing Malaysia to successfully move ahead with its industrial goals.

"The semiconductor value chain is so intertwined that no single country or company can do everything alone. Because every geographical region is aggressively racing to anchor semiconductor innovation, clarity and commitment to the NSS means making sure there are enough streamlined business processes to help new and established companies to expand.”

He added that Malaysia’s ecosystem has been built around assembly and testing, which are not limited to factories that produce or test these chips, but also the peripheral ecosystems that have been put in place.

“When the existing ecosystem is working so well, that's a strength. The question is, how do you take this strength ahead? With aspirations in IC design, the most important thing that Malaysia can do is to make sure this ecosystem extends naturally to bring in companies that are also working on these new areas on advanced packaging and IC.

“There are a lot of natural symbiotic relationships that can happen, but you do need key customers or suppliers to be anchored here.”

As the tech industry moves deeper into what Tan described as the "early innings of AI", the demands placed on silicon have shifted dramatically.

While the industry grapples with the impending physical limitations of traditional scaling — historically governed by Moore’s Law — Applied Materials evaluates technological evolution through a multi-dimensional lens: performance, power, area cost and time-to-market.

"Everyone wants a chip to have higher performance, specifically to be more powerful, faster, and capable of heavier computation, but equally critical is the second ‘P’ — power. The goal is for the chip to use as little power as possible, taking into account that data centres housing these massive AI chips consume roughly 7% to 8% of the world’s entire energy supply,” he explained.

“Left unchecked, as the semiconductor industry expands past the US$1 trillion (RM4.1 trillion) mark in the next five years, data centre power consumption could surge to between 12% and 14% global share. We fundamentally need chips that consume less power.”

Tan added that to enable this framework, boundaries need to be pushed, particularly in the areas of advanced logic, advanced memory and advanced packaging. In the logic space, the company is pioneering Gate-All-Around transistor architectures to squeeze billions of transistors into a single die.

On the memory front, it is addressing acute global shortages by enabling high-bandwidth memory and 3D DRAM (three-dimensional dynamic random access memory) through vertical stacking.