Malaysia emerges as a hotspot for chip corporations amid U.S.-China tech struggle | USAEMALL.com

Malaysia is rising as a hotspot for semiconductor factories as U.S.-China tensions immediate firms to diversify operations.

“Malaysia has well-established infrastructure with around five decades of experience in the ‘back end’ of the semiconductor manufacturing process, particularly in assembly, testing and packaging,” mentioned Kenddrick Chan, head of the digital worldwide relations undertaking at LSE IDEAS, the international coverage think-tank of the London School of Economics and Political Science.

Semiconductors – important elements present in every part from smartphones to vehicles – have been on the heart of a U.S.-China expertise struggle.

American chip big Intel in December 2021 mentioned it can make investments greater than $7 billion to construct a chip packaging and testing manufacturing facility in Malaysia, with manufacturing anticipated to start 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, Intel Malaysia’s managing director, instructed CNBC.

Intel’s first abroad manufacturing facility was an meeting website in Penang launched in 1972 with a $1.6 million funding. The firm went on so as to add a full check facility in addition to a growth and design heart in Malaysia.

Another U.S. chip big, GlobalFoundries, in September opened a hub in Penang to “support global manufacturing operations” alongside its crops in Singapore, the U.S. and Europe.

“The forward-thinking policies and strong support from the regional government together with partners like InvestPenang have built a strong ecosystem for the industry to thrive,” mentioned Tan Yew Kong, senior vice chairman and normal supervisor of GlobalFoundries Singapore.

Germany’s prime chipmaker Infineon in July 2022 mentioned it can construct a 3rd wafer fabrication module in Kulim whereas Neways, a key provider to Dutch chip tools maker ASML, mentioned final month it will assemble a brand new manufacturing facility in Klang.

“Malaysia’s edge has always been its skilled labor in packaging, assembly and testing, and lower comparative operating costs, making exports more competitive globally,” mentioned Yinglan Tan, founding managing accomplice at Insignia Ventures Partners. He added that the ringgit’s present place makes the nation an “attractive location for foreign players.”

Malaysia holds 13% of the worldwide marketplace for chip packaging, meeting and testing providers, mentioned the Malaysian Investment Development Authority in a Feb. 18 report. Exports of semiconductor units and built-in circuits elevated by 0.03% to 387.45 billion Malaysian ringgit ($81.4 billion) in 2023, amid world chip demand weak spot.

Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai mentioned many Chinese corporations diversified a few of their manufacturing to Malaysia, calling the nation China’s “plus one.”

Zafrul Aziz, Malaysia’s funding, commerce and business minister, instructed CNBC in January that Malaysia goals to give attention to the “front end” of the chip manufacturing course of, as a substitute of simply the “back end.” Front finish processes contain wafer fabrication and photolithography, whereas again finish processes focuses on packaging and meeting.

In a bid to develop the nation’s semiconductor ecosystem and appeal to investments, Malaysia in January arrange a nationwide semiconductor strategic taskforce, native media reported.

Similarly, international locations like India and Japan have been courting international corporations to arrange operations on native soil as they purpose to grow to be main chip hubs alongside the U.S., Taiwan and South Korea.

India in February authorized the development of three semiconductor crops with investments of greater than $15 billion. India in June authorized U.S. reminiscence chip big Micron’s plans to arrange a semiconductor unit.

In the identical month, the world’s largest contract chip maker TSMC opened its first Japan manufacturing facility because it diversifies away from Taiwan amid U.S.-China tensions.

Washington launched sweeping guidelines in October 2022 geared toward limiting China’s entry to superior chip expertise amid issues that China may use them for navy functions. Last yr, the U.S. introduced new laws preventing U.S. chip designer Nvidia from promoting superior AI chips to China.

“Malaysia and Asia in general is poised to benefit from the China-U.S. tech war, where access to advanced semiconductor chips are being weaponised as a tool to establish global technological supremacy,” mentioned May-Ann Lim, director of the info governance observe at public coverage consultancy Access Partnership.

While Malaysia stands to learn from the U.S.-China chip struggle, its mind drain poses challenges as employees depart the nation for higher job prospects and better salaries.

“This may well be the case if companies invest in upskilling the workforce in Malaysia, only to lose them to other competitors around the region once they have the skills,” mentioned Lim.

An official research carried out in 2022 revealed that 3 out of 4 Malaysian employees in Singapore are expert or semi-skilled, highlighting the nation’s mind drain drawback.

“Whether this demand generated by supply chain diversification will be met with enough supply of skilled talent in the country is still an ongoing operational challenge,” mentioned Tan of Insignia Ventures Partners.

Malaysian Prime Minister Anwar Ibrahim in September mentioned the federal government is trying to draw expert Malaysians to return and contribute to the nation.