KUALA LUMPUR, MALAYSIA – 2018/01/24: A foreigner is seen with a Malaysian flag in the background. Kuala Lumpur or commonly known as KL is the national capital of Malaysia and is the fastest growing metropolitan region in Southeast Asia. The urban city is also known worldwide for its tourism and shopping. Kuala Lumpur has excellent public transportation for getting around the city. (Photo by Faris Hadziq/SOPA Images/LightRocket via Getty Images)
Faris Hadziq | Sopa Images | Light flare | Getty Images
Malaysia is emerging as a hotspot for semiconductor factories, as tensions between the United States and China spur companies to diversify their operations.
“Malaysia has a well-established infrastructure with around five decades of experience in the backend of the semiconductor manufacturing process, particularly in assembly, testing and packaging,” said Kenddrick Chan , Head of the Digital International Relations Project at LSE IDEAS, the foreign policy think tank of the London School of Economics and Political Science.
Semiconductors – essential components found in everything from smartphones to automobiles – have been at the center of the technology war between the United States and China.
American chip giant Intel in December 2021, it announced that it would invest more than $7 billion to build a chip packaging and testing plant in Malaysia, with production expected to begin in 2024.
“Our decision to invest in Malaysia is rooted in its diverse talent pool, well-established infrastructure and robust supply chain,” Aik Kean Chong, managing director of Intel Malaysia, told CNBC.
Intel’s first overseas production facility was an assembly site in Penang, launched in 1972 with an investment of $1.6 million. The company later added a comprehensive testing facility as well as a development and design center in Malaysia.
Another American chip giant, Global Foundriesopened a hub in Penang in September to “support global manufacturing operations” alongside its factories in Singapore, the United States and Europe.
“Forward-thinking policies and strong support from the regional government as well as partners like InvestPenang have built a strong ecosystem for the industry to thrive,” said Tan Yew Kong, senior vice president and managing director of GlobalFoundries Singapore.
Leading German chipmaker Infineon announced in July 2022 that it would build a third wafer manufacturing module in Kulim, while Neways, a key supplier to the Dutch chip equipment maker. ASMLannounced last month that it would build a new production plant in Klang.
“Malaysia’s advantage has always been its skilled workforce in packaging, assembly and testing, as well as its lower comparative operating costs, making exports more competitive at scale. global,” said Yinglan Tan, founding managing partner of Insignia Ventures Partners. He added that the the ringgit The current position makes the country an “attractive location for foreign actors”.
Malaysia holds 13% of the global market for chip packaging, assembly and testing services, the Malaysian Investment Development Authority said in a February 18 report. Exports of semiconductor devices and integrated circuits rose 0.03 percent to 387.45 billion Malaysian ringgits ($81.4 billion) in 2023, amid weak global chip demand.
Malaysian Semiconductor Industry Association president Datuk Seri Wong Siew Hai said many Chinese companies have diversified some of their production to Malaysia, calling the country China’s “plus one”. .
Zafrul Aziz, Malaysia’s minister of investment, trade and industry, told CNBC in January that Malaysia wanted to focus on the “front end” of the chip manufacturing process, rather than just the “back end.” end”. The front-end processes involve wafer fabrication and photolithography, while the back-end processes focus on packaging and assembly.
In a bid to develop the country’s semiconductor ecosystem and attract investment, Malaysia established a national semiconductor strategic task force in January, local media reported.
US-China tensions
Likewise, countries like India and Japan have courted foreign companies to set up operations locally with the aim of becoming major chip hubs alongside the United States, Taiwan and China. South Korea.
India in February approved the construction of three semiconductor factories with investments of more than $15 billion. India approved US memory chip giant in June Microns plans to create a semiconductor unit.
The same month, TSMC, the world’s largest contract chipmaker, opened its first factory in Japan as part of its diversification away from Taiwan, amid tensions between the United States and China.
Washington introduced sweeping rules in October 2022 aimed at restricting China’s access to advanced chip technology, amid concerns that China could use them for military purposes. Last year, the United States announced new regulations preventing American chip designer Nvidia from selling advanced AI chips to China.
“Malaysia and Asia in general are poised to benefit from the Sino-US technology war, where access to advanced semiconductor chips is used as a weapon to establish global technological supremacy,” May said. Ann Lim, director of the data governance practice at public policy consultancy Access Partnership.
Brain drain
While Malaysia stands to benefit from the US-China chip war, the brain drain poses problems as workers leave the country for better job prospects and higher salaries.
“This could well be the case if companies invest in upskilling the workforce in Malaysia, only to lose it to other competitors in the region once they have the skills,” Lim said .
An official study conducted in 2022 found that 3 out of 4 Malaysian workers in Singapore are skilled or semi-skilled, highlighting the country’s brain drain problem.
“Whether this demand generated by supply chain diversification will be met by a sufficient supply of skilled talent in the country remains an ongoing operational challenge,” said Tan of Insignia Ventures Partners.
Malaysian Prime Minister Anwar Ibrahim said in September that the government was seeking to attract qualified Malaysians to return and contribute to the country.
cnbc
