• Malaysia’s Budget 2027 semiconductor funding from Khazanah and KWAP rises to RM1.2 billion
• TNB adds RM15 billion to the grid that chipmakers and data centres rely on

Malaysia’s Budget 2027 semiconductor measures put government-linked investors at the centre, with Khazanah Nasional and the Retirement Fund (Incorporated), or KWAP, committing RM1.2 billion to help local chip companies move into higher-value segments, according to the budget speech Prime Minister Anwar Ibrahim delivered on 9 October.

The two funds committed RM550 million to the semiconductor ecosystem in Budget 2026, aimed at strengthening partnerships between local firms and multinationals, according to The Star’s summary of last year’s measures.

Where the Budget 2027 semiconductor money sits

The RM1.2 billion forms part of RM25 billion in domestic investment that government-linked investment companies (GLICs) will mobilise under the GEAR-uP programme, the speech said. It includes a partnership between Khazanah and the Selangor state government on an investment fund to develop the state’s semiconductor industry. The speech did not say how much of the RM1.2 billion goes to that fund.

In its section on Penang, the speech said Khazanah and InvestPenang will set up a RM100 million Strategic Investment Fund to back semiconductor and advanced manufacturing companies in their early stages of growth, with Penang positioned as the country’s technology finance centre. Development bank BPMB will allocate RM7 billion across seven strategic sectors, including semiconductors.

The Malaysian Technology Development Corporation’s SemiconStart programme will provide follow-on equity for start-ups in IC design, advanced packaging and semiconductor materials, though the speech gave no amount. SemiconStart launched in July with a first cohort of 10 companies, with selected companies able to receive incubation support of up to RM1 million each, Business Today reported.

Moving beyond assembly and testing

Malaysia holds about 13% of the global market for semiconductor assembly, testing and packaging, according to The Edge. The National Semiconductor Strategy, launched in 2024, sets out the shift beyond that base. When Anwar announced at least RM25 billion in fiscal support for the strategy in May 2024, the targets included at least RM500 billion in investment in its first phase, at least 10 local design and advanced packaging companies with revenues of RM1 billion to RM4.7 billion, and 60,000 trained engineers, according to MIDA.

Tengku Zafrul Abdul Aziz, chairman of the Malaysian Investment Development Authority, said local firms needed to turn the budget allocation into more work in higher-value areas such as IC design. “The ecosystem is quite mature, but we need to strengthen the way we are in that value chain,” he said on Bernama TV’s The Nation on 14 October, Malay Mailreported. He added that manufacturing projects could take about two years from groundbreaking to completed factories, depending on the industry.

Before the budget, Apex Securities expected targeted measures for the sector rather than one large semiconductor allocation, according to The Edge on 5 October. The brokerage’s checks with Penang companies found AI-driven demand holding strong into 2027 and 2028, with firms running near full capacity and facing long equipment lead times, input shortages and difficulty retaining engineers.

Power and data centres behind the chip push

The speech said Tenaga Nasional Bhd (TNB) would invest RM15 billion to strengthen the national grid to meet electricity demand. Tax incentives for green technology were enhanced and extended to 31 December 2030. A RM1.25 billion New Economy Venture Fund set up by Sime Darby Property, the Employees Provident Fund and the Armed Forces Fund Board (LTAT) will develop data centres and industrial logistics assets in Elmina, Selangor. The government is also planning a sovereign AI cloud to keep national data under Malaysian control, though the speech gave no allocation for it.

Cheam Tat Inn, managing director of Equinix Malaysia, said the grid investment and the green incentive extension reinforce the need to align digital infrastructure growth with long-term energy readiness. “As digital infrastructure expands, energy efficiency, water stewardship and infrastructure readiness must remain central considerations,” he said in commentary on the budget.

Wong Weng Yew, managing director of Open DC and group managing director of Extreme Broadband, said the Penang fund pointed to rising demand for digital infrastructure in the north. The fund “sends a clear signal of growing demand for the digital infrastructure these industries depend on,” he said. Open DC is scaling its PE2 facility in Penang in phases towards 100MW, sized to contracted demand, he added.

The US tariff question

Four days after the budget, Investment, Trade and Industry Minister Johari Abdul Ghani said Malaysian semiconductor exports to the US remain exempt from tariffs. “We have not received any indication that the US will impose tariffs on Malaysian semiconductors at this time,” he said, according to The Edge.

In the wider trade talks with the US, Johari said the only issue not yet finalised was excess capacity, which he attributed to goods originating from third countries.