KUALA LUMPUR (Oct 4): Malaysia’s semiconductor industry has asked Putrajaya to up reinvestment and research incentives, ease access to skilled foreign talent as well as reduce friction of doing business in Budget 2027 to enable the next phase of growth, as competition for investment intensifies globally.
While Malaysia continues to attract significant investments — with RM16.9 billion approved investments in the semiconductor subsector in 2025 — the Malaysia Semiconductor Industry Association (MSIA) said rapid developments in artificial intelligence, geopolitical tensions, changing supply chains and competition for investment and talent were increasing pressure on Malaysia to strengthen its semiconductor policies.
Malaysia “must respond by strengthening the policy enablers that support long-term industry competitiveness” given rapid advances in artificial intelligence, geopolitical developments, changing global supply chains and intensifying competition for investment and talent are reshaping the global semiconductor landscape, it said in a statement on Sunday evening.
Citing the Ministry of Finance’s pre-budget statement that identified high-value investment, business competitiveness, innovation and quality employment among priority areas, the MSIA listed several recommendations to the government ahead of the Budget 2027 tabling on Oct 9 “to complement Malaysia’s broader push towards a higher-value and technology-intensive economy while ensuring that Malaysian companies and talent participate more meaningfully in the sector’s growth”.
Among its proposals, the MSIA called for the qualifying expenditure limit under the Automation Capital Allowance to be raised to RM100 million from RM10 million, “to better reflect the scale of automation and advanced manufacturing investments undertaken by the semiconductor and the electrical and electronics (E&E) industry”.
It also proposed a 200% tax deduction for qualifying research and development (R&D) expenditure, with broader coverage of R&D activities and expenditure relevant to the semiconductor and E&E industry.
To boost higher-value engineering, design, innovation and technology-development activities while strengthening domestic R&D capacity, the MSIA also proposed targeted semiconductor and E&E R&D grants, shared R&D infrastructure and stronger industry-university collaboration.
Apart from attracting new investments, the MSIA said Malaysia need to also encourage companies already operating in the country to reinvest, expand and move into higher-value activities.
To spur continuous reinvestment and scalability, the association proposed a differentiated and lifecycle-based investment incentive framework for new strategic investors, existing companies undertaking expansion and Malaysian-owned companies seeking to grow internationally.
It also called for changes to customs procedures governing Licensed Manufacturing Warehouses (LMW) and Free Industrial Zones (FIZ), including allowing qualifying facilities to undertake R&D activities and providing duty and sales tax exemptions for certain imported used machinery and testing equipment for higher-value E&E manufacturing activities.
On talent, MSIA proposed greater flexibility in the use of Human Resource Development Corp (HRD Corp) levies and suggested allocating 65% to company-led training, 15% to industry-led programmes and 20% to strategic localisation and capability-development projects.
To support innovation, design and development as well as specialised expertise in critical fields, the MSIA also called for easier access to specialised foreign talent where local expertise was insufficient, alongside knowledge-transfer requirements. It also asked that eligible international graduates in critical disciplines from Malaysian universities be allowed to work in the country for up to two years after graduation.
Other proposals included modernising stamp duty rules, expanding semiconductor incubators and shared R&D and testing facilities, and providing greater support for Malaysian companies seeking to enter higher-value segments of the semiconductor supply chain.
“Malaysia has built a strong foundation in the global semiconductor industry, and we must continue to grow and excel. Competition for investment, technology and talent is intensifying, and our policies must continue to evolve with the needs of the industry. While attracting new strategic investments remains important, we must also create the right environment for companies already in Malaysia to continuously reinvest, expand their operations, undertake more R&D and move into higher-value activities,” MSIA president Datuk Seri Wong Siew Hai said in the statement.
“Budget 2027 is an opportunity to strengthen these fundamentals. With the right policies, closer industry-government collaboration and continued investment in technology, talent and our local ecosystem, Malaysia can further strengthen its position in the global semiconductor value chain and create greater value and opportunities for Malaysian companies and talent.”
The MSIA said it “looks forward to continuing its engagement with the government, relevant ministries and agencies to further develop and implement measures that strengthen Malaysia’s semiconductor competitiveness”.