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Malaysia emerges as a hotspot for semiconductor corporations amid U.S.-China chip tensions

KUALA LUMPUR, MALAYSIA – 2018/01/24: A foreigner is considered with a Malaysia flag as a background. Kuala Lumpur or known as KL is the nationwide capital for Malaysia and is the quickest growing metropolitan regions in South-East Asia. The urban city is moreover successfully-known to the world for tourism and buying. Kuala Lumpur has a monumental public transportation for of us poke across the city. (Picture by Faris Hadziq/SOPA Photos/LightRocket by Getty Photos)

Faris Hadziq | Sopa Photos | Lightrocket | Getty Photos

Malaysia is emerging as a hotspot for semiconductor factories as U.S.-China tensions suggested corporations to diversify operations.

“Malaysia has successfully-established infrastructure with around five decades of journey in the ‘again quit’ of the semiconductor manufacturing process, in particular in meeting, trying out and packaging,” said Kenddrick Chan, head of the digital global household mission at LSE IDEAS, the international policy have confidence-tank of the London College of Economics and Political Science.

Semiconductors – crucial parts chanced on in everything from smartphones to autos – bask in been at the heart of a U.S.-China technology wrestle.

American chip giant Intel in December 2021 said this would presumably perhaps perhaps moreover invest greater than $7 billion to manufacture a chip packaging and trying out factory in Malaysia, with manufacturing anticipated to initiate in 2024.

“Our decision to put money into Malaysia is rooted in its various ability pool, successfully-established infrastructure, and tough present chain,” Aik Kean Chong, Intel Malaysia’s managing director, told CNBC.

Intel’s first overseas manufacturing facility turned into once an meeting self-discipline in Penang launched in 1972 with a $1.6 million investment. The corporate went on to add a paunchy test facility as successfully as a building and maintain center in Malaysia.

One other U.S. chip giant, GlobalFoundries, in September opened a hub in Penang to “make stronger global manufacturing operations” alongside its crops in Singapore, the U.S. and Europe.

“The forward-pondering policies and stable make stronger from the regional authorities collectively with companions treasure InvestPenang bask in constructed a stable ecosystem for the replace to thrive,” said Tan Yew Kong, senior vp and general manager of GlobalFoundries Singapore.

Germany’s prime chipmaker Infineon in July 2022 said this would presumably perhaps perhaps moreover fabricate a third wafer fabrication module in Kulim whereas Neways, a key seller to Dutch chip equipment maker ASML, said closing month it will build a fresh manufacturing facility in Klang.

“Malaysia’s edge has always been its educated labor in packaging, meeting and trying out, and decrease comparative working charges, making exports more aggressive globally,” said Yinglan Tan, founding managing partner at Insignia Ventures Companions. He added that the ringgit’s fresh set apart apart makes the nation an “glorious set apart apart for international gamers.”

Malaysia holds 13% of the global market for chip packaging, meeting and trying out products and companies, said the Malaysian Funding Constructing Authority in a Feb. 18 epic. Exports of semiconductor devices and integrated circuits increased by 0.03% to 387.forty five billion Malaysian ringgit ($81.4 billion) in 2023, amid global chip ask weak spot.

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

Zafrul Aziz, Malaysia’s investment, replace and replace minister, told CNBC in January that Malaysia targets to accommodate the “front quit” of the chip manufacturing process, as an more than just a few of correct the “again quit.” Entrance quit processes absorb wafer fabrication and photolithography, whereas again quit processes makes a speciality of packaging and meeting.

In a suppose to develop the nation’s semiconductor ecosystem and attract investments, Malaysia in January dwelling up a nationwide semiconductor strategic taskforce, local media reported.

U.S.-China tensions

Equally, international locations treasure India and Japan bask in been relationship international corporations to dwelling up operations on local soil as they draw to alter into essential chip hubs alongside the U.S., Taiwan and South Korea.

India in February well-liked the come of three semiconductor crops with investments of greater than $15 billion. India in June well-liked U.S. reminiscence chip giant Micron’s plans to dwelling up a semiconductor unit.

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

Washington presented sweeping concepts in October 2022 aimed toward limiting China’s earn entry to to developed chip technology amid issues that China might presumably perhaps perhaps moreover utilize them for defense force functions. Final 300 and sixty five days, the U.S. announced fresh regulations combating U.S. chip model designer Nvidia from selling developed AI chips to China.

“Malaysia and Asia in general is poised to rob pleasure in the China-U.S. tech wrestle, where earn entry to to developed semiconductor chips are being weaponised as a utility to set global technological supremacy,” said Could-Ann Lim, director of the solutions governance put collectively at public policy consultancy Accumulate entry to Partnership.

Mind drain

Whereas Malaysia stands to rob pleasure in the U.S.-China chip wrestle, its brain drain poses challenges as workers go the nation for higher job prospects and increased salaries.

“This might presumably perhaps perhaps moreover successfully be the case if corporations put money into upskilling the personnel in Malaysia, handiest to lose them to other opponents across the command after they bask in got the abilities,” said Lim.

An official leer conducted in 2022 printed that 3 out of 4 Malaysian workers in Singapore are educated or semi-educated, highlighting the nation’s brain drain trouble.

“Whether or now not this ask generated by present chain diversification will seemingly be met with ample present of educated ability in the nation is unruffled an ongoing operational trouble,” said Tan of Insignia Ventures Companions.

Malaysian Prime Minister Anwar Ibrahim in September said the authorities is taking a peek to attract educated Malaysians to advance again and make contributions to the nation.

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