KUALA LUMPUR (Sept 21): Malaysia should offer stronger incentives to attract front-end semiconductor investments to capture more of the artificial intelligence (AI)-driven boom of the sector, particularly in advanced packaging, said Nomura Asset Management.
It said Malaysia should be more aggressive in courting advanced front-end manufacturers, such as the Taiwan Semiconductor Manufacturing Company (TSMC). Front-end manufacturing of semiconductors is the initial phase of fabricating microscopic transistors and electronic pathways onto raw silicon wafers.
“I would double, triple that (subsidies offered to foreign companies to invest in Malaysia). Now is the opportunity to attract [foreign] companies because it's a race to attract foreign companies, and other countries are dangling the same thing,” said Nomura Asset Management UK Ltd executive director Takaeshi Kawamoto in a technology and semiconductor outlook briefing on Monday.
He added that combining advanced front-end manufacturing with Malaysia’s existing back-end expertise would help domestic semiconductor companies move further up the value chain.
Takashi said Malaysia should capitalise on its cost competitiveness, natural resources and ability to maintain ties with both China and the United States to attract more semiconductor investment.
“Malaysia has huge natural resources. It has a young, tech-savvy workforce, and so it is a very cost-efficient country,” he said.
Asked about concerns about a potential AI bubble, Takashi noted there are differences from past tech bubbles like the dot-com era, particularly in terms of financing.
“The big difference in the dot-com bubble was that it was financed mostly by debt. But this time, a lot of the circular financing, [for example] done by Nvidia, but they have hundreds of billions of dollars of free cash flow to finance this,” Takashi said.
On outlook, Nomura Asset Management viewed the fundamentals for the semiconductor industry as constructive, supported by sustained AI demand.
Malaysia accounts for about 13% of global semiconductor assembly, testing and packaging, but the capabilities are fragmented and there is no end-to-end advanced packaging chain, which is the assembly of chiplets into a single high-performance package that saves space.
The country aims to capture about 7% of the global advanced packaging market by 2035.