COURTED BY GREAT POWERS
This story, of course, builds on the chips war in which Malaysia has emerged as a “surprise winner”. The world felt, for the first time, Malaysia’s centrality in backend assembly, testing and packaging during COVID-19, when Malaysia’s lockdown halted production at Toyota, Ford, Nissan and General Motors.
Malaysia holds 13 per cent of global backend chip production and 7 per cent of the global market, and supplies around 20 per cent of US semiconductor imports. While Malaysia’s efforts to upgrade to the frontend are still too early to tell, Malaysia will remain a critical node for chips.
Geography works in Malaysia’s favour. The Straits of Malacca is a global trade chokepoint, with 25 per cent of the world’s traded goods and 60,000 annual vessels passing through. Port Klang and Port Tanjung Pelepas are world-class, and the prospect of higher tariffs and volumes (TEUs) is prompting Malaysia’s largest ever IPO.
Compared to regional peers, Malaysia is well-positioned to benefit from shifting global trade dynamics. The Economist recently argued that Malaysia is likely to emerge as one of the winners in Trump’s tariff offensive. Key reasons include more favourable tariff differentials, lower transshipments and lower reliance on American demand.
US tariffs may also accelerate Southeast Asia’s industrial upgrade, as high-value digital services begin shifting towards Asia. Malaysian policies targeting these strategic sectors could allow it to capitalise on this shift.
Leverage, in international politics, is determined by who needs whom more. It is unusual for a middle state like Malaysia to hold assets that great powers want to compete for.
With a mix of fortune (natural resources) and effort (policies and diplomacy), Malaysia has what it takes to emerge as a consequential middle power. The ball is in her court to make the best out of it.
James Chai is a political analyst, columnist and the author of Sang Kancil (Penguin Random House). He writes a monthly column for CNA, published every second Friday.
https://www.channelnewsasia.com/commentary/malaysia-rare-earths-processing-chips-semiconductors-middle-power-5344161
