Malaysia Semiconductor

SEMICON SEA 2022: Malaysia seeks to attract semiconductor giants like TSMC

  • Malaysia, being Southeast Asia’s semiconductor hub, is still open to more investments from chip players around the world, to complete its ecosystem.
  • The country’s E&E industry in the first quarter of this year alone, had contributed over RM19 billion with 13,700 new job opportunities.

Two years of pandemic and global chip shortages has made the world realize one thing — Asia plays an indispensable role in the global semiconductor supply chain. In particular, Asia Pacific (APAC) is the world’s biggest market for semiconductors, accounting for 60% of global sales, within which China alone accounts for over 30%. As governments in the region are stepping up their efforts to bolster their national semiconductor capabilities, Malaysia continues to engage with global chip giants to invest into the country.

For starters, Malaysia has long held a significant role in the global chip supply chain. The country’s semiconductor industry is mostly concentrated in an island-state, Penang, which is also dubbed the Silicon Valley of the East. To put into context the significance, Penang, which represents 80% of the nation’s contribution to global backend semiconductor output, has also accounted for over 5% of the world’s semiconductor sales over the last few years, according to Malaysian Investment Development Authority (MIDA).

Yet, the country has no plans to rest on its laurels. “We are working towards getting all the big names [in the semiconductor industry],” CEO Arham Abdul Rahman told Tech Wire Asia (TWA) during a media briefing at SEMICON Southeast Asia 2022 in Penang yesterday. Adding to that, Arham highlighted that the investments that have made its way into the country, especially last year, have been “stellar”, breaching the RM300 billion mark for the first time. 

“Never in the history of the country have we accumulated that amount of investment mainly contributed by a few mega projects,” he said. MIDA’s data shows that Malaysia approving a record RM306.5 billion (US$73.33 billion) in investments last year was a 83% jump from 2020, and it was mainly led by the manufacturing sector.

The manufacturing sector in particular secured RM195.1 billion worth of projects in 2021, 114% more than in the previous year, with the bulk of investment going to the electrical and electronics industry. As expected, Penang, which is also Southeast Asia’s semiconductor manufacturing hub, was the largest recipient of investments.

In justifying why Malaysia, especially Penang, is a hub when it comes to the region’s semiconductor industry, Arham attributed it to the “almost complete ecosystem” of the electrics and electronics as well as semiconductor sector. “All players, be it big or medium-sized companies, know what Malaysia can offer in particular, hence in that sense, we have an advantage compared to our neighboring countries,” he added.

To Arham, having more players jump on board will allow for the country to complete its ecosystem by having other suppliers, including raw materials and machinery suppliers among others. “We have developed a good, almost complete ecosystem, especially in Penang, but other states are an option too. We also intend to get into other sectors as well, including the machinery, aerospace, and medical devices ecosystem,” he noted.

To recall, On December last year, MIDA revealed that US semiconductor giant Intel, plans to build new packaging (assembly) and test facilities at the Bayan Lepas Free Industrial Zone in Penang, as well as at the Kulim Hi-Tech Park in Kedah state, a short distance away. The RM30 billion (US$7.1 billion) project is expected to create more than 5,000 construction-related jobs and more than 4,000 jobs at Intel’s subsidiary in Malaysia. 

Prior to that, Netherlands-based semiconductor company Nexperia announced that it is building new production facilities fully automated with Industry 4.0 standards to support its growth on essential power products [semiconductor devices] for the automotive industry. Even German semiconductor manufacturer Infineon announced in February this year that it will be building its third manufacturing line at its Kulim plant in Kedah, Malaysia. 

Additionally, Austria’s AT&S is in the midst of building a new Integrated Circuit (IC) Substrates manufacturing facility in Kulim Hi-Tech. It is the company’s first high-tech manufacturing plant in Southeast Asia. Besides that, Japan’s electronic components company Taiyo Yuden is also building new facilities in Malaysia for the expansion of multilayer ceramic capacitors production, MIDA said.

Even US-based contract manufacturer Applied Engineering will also be establishing a joint venture (JV) plant later this year, with Malaysian counterpart, QES Manufacturing Sdn Bhd (QES) at Batu Kawan Industrial Park in Penang. Both parties signed an agreement to establish Applied Engineering Technology (M) Sdn Bhd (AET) to provide high-tech electromechanical contract manufacturing services.

Overall, Arham highlighted that Malaysia is home to over 5,000 investors from more than 40 countries. In the first quarter of 2022 alone, the country continued to attract a total of RM42.8 billion approved investments, of which the electrical and electronics industry contributed RM19 billion with 13,700 new job opportunities.

“MIDA will stay committed in building resilient and sustainable electronics supply chain in Malaysia and the ASEAN region. We pursue high-quality and technology-driven investments to boost socio-economic development and trade growth. Apart from local industry players, we are expanding the benefits of our manufacturing ecosystem to global businesses and brands,” he concluded.