In the Heat of U.S.-China Chip Tension, Malaysia Takes Center Stage as Semiconductor Hub

In the Heat of U.S.-China Chip Tension, Malaysia Takes Center Stage as Semiconductor Hub

Malaysia has now become a hub for the semiconductor manufacturing industry, driven by political tensions between the United States and China, prompting companies to seek to diversify their operations.

On Wednesday, CNBC reported that Kenddrick Chan, head of the digital international relations project at LSE IDEAS, a foreign policy think tank affiliated with the London School of Economics and Political Science, mentioned that Malaysia has a mature infrastructure with over five decades of experience in semiconductor manufacturing processes, particularly in assembly, testing and packaging.

Semiconductors, critical components in devices ranging from smartphones to automobiles, have become a focal point of the technology battle between the United States and China. In December 2021, American chip giant Intel announced an investment of more than US$7 billion (RM33.18 billion) to set up a chip testing and packaging plant in Malaysia, which is expected to be operational in 2024.

Aik Kean Chong, managing director of Intel Malaysia, revealed that Intel's decision to invest in Malaysia was influenced by the diverse talent pool, established infrastructure and robust supply chain, as reported by CNBC. Intel began its overseas manufacturing expansion by establishing an assembly plant in Penang in 1972 with an investment of US$1.6 million. Over time, Intel also equipped the facility with a full test center and development and design center in Malaysia.

Meanwhile, GlobalFoundries, another major chip company from the United States, opened a center in Penang in September to support its global manufacturing operations, complementing its facilities in Singapore, the United States and Europe. In July 2022, Infineon, a leading German chipmaker, also announced plans to build a third wafer fabrication module in Kulim. In addition, Neways, a key supplier to Dutch chip equipment maker ASML, announced last month that it would set up a new manufacturing plant in Klang.

According to Yinglan Tan, managing partner and founder of Insignia Ventures Partners, Malaysia's advantage lies in its skilled workforce in packaging, assembly and testing, as well as its lower operating costs compared to other countries, making its exports more competitive globally. He also noted that the current exchange rate of the ringgit makes Malaysia an attractive location for foreign investors.

The Malaysian Investment Development Authority reported in its February 18 report that Malaysia dominates 13% of the global market share for chip packaging, assembly and testing services. Despite the decline in global chip demand, exports of semiconductor devices and integrated circuits from Malaysia will increase by 0.03% to US$81.4 billion in 2023.

On the other hand, according to a statement by Datuk Seri Wong Siew Hai, president of the Malaysian Semiconductor Industry Association, several Chinese companies have expanded production to Malaysia, describing the country as a "plus one" for China.

Source: CNBC

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