It is also an investment destination for some of the bigger American multinational corporations (MNCs) in the sector including Intel, Advanced Micro Devices (AMD), Micron and Infineon.
Penang’s importance as a chip hub underlines Malaysia’s significance to the global supply chain, with the Southeast Asian nation accounting for 13 per cent of global testing and packaging of the product, according to the Malaysian Investment Development Authority.
On one hand, Penang officials are sanguine that its semiconductor industry can stay robust, citing how despite the current uncertain climate, companies are still exploring expansion opportunities.
In a written response to queries from CNA, Chow said that with Malaysia’s reciprocal tariff rate set at 19 per cent and sectoral tariffs on semiconductors not yet formally announced, the country and Penang remains in a “relatively competitive position” to draw investment.
“While global investment sentiment experienced some uncertainty in recent years, we’ve seen renewed engagement from US companies, with several returning to explore expansion opportunities through (the state’s investment promotion agency) InvestPenang.
“Increasingly, companies are adopting a forward-looking approach, designing strategies that extend beyond current political cycles in the US,” Chow added.
He quoted Malaysia’s investment figures, citing how in the first half of 2025, the US is the highest contributor of approved manufacturing foreign direct investment (FDI) in Penang with a total investment value of RM2.6 billion (US$615.5 million), representing a quarter of the northern state’s approved manufacturing investment.
Chow said this indicates Penang’s attractiveness for US companies presently.
On the other hand, economists told CNA that Penang should be bracing for impact, amid warning signs from industry leaders in Malaysia and some corporations holding pause on their investments.
The experts added that a high semiconductor tariff rate of potentially 80 per cent or more could directly impact the sector and reduce foreign investment due to the state’s high exposure to US exports.
Based on government data for the first half of this year, Penang accounted for around 55 per cent of Malaysia’s exports to the US, dominated by semiconductors as well as electrical and electronics.
Malaysian-American economist Woo Wing Thye, a distinguished fellow at the think tank Penang Institute, told CNA that a high levy would hurt the sector and raise prices of products made in Penang – to the extent that it may no longer be realistic to operate there and export to the US.
“If the semiconductor tax is announced at 80 per cent or more, prices will go up and this will hurt the industry,” said Woo, who is also vice-president for the United Nations Sustainable Development Solutions Network’s Asia office.
He added that tariffs would certainly hurt the high-tech semiconductor firms, and while chips made in Penang are typically made for mid-level tech products such as household items like vacuum cleaners, they will also not be spared from the adverse affects of an additional hefty trade levy.
https://www.channelnewsasia.com/asia/penang-tariffs-semiconductor-chips-silicon-valley-5399886
