Malaysia: The Rising Star in the Semiconductor War

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Kuala Lumpur, Malaysia – As global tensions between the U.S. and China escalate, Malaysia has emerged as an attractive destination for semiconductor fabrication, drawing investments from major chip giants like Intel and GlobalFoundries.

Malaysia’s Key Advantage: Expertise in Back-End Processes

Malaysia has a well-established infrastructure and decades of experience in the “back end” of semiconductor manufacturing, particularly in assembly, testing, and packaging. This expertise has positioned the country as a leader in the global semiconductor supply chain.

Intel’s Billion-Dollar Investment

In December 2021, Intel announced a significant investment of billion to build a chip packaging and testing factory in Malaysia, with production expected to commence in 2024. “Our investment in Malaysia is rooted in its skilled talent pool, robust infrastructure, and supply chain,” said Aik Kean Chong, Intel Malaysia’s managing director.

Other Chipmakers Follow Suit

GlobalFoundries, another U.S. chip giant, established a hub in Penang in September 2022 to support its manufacturing operations. Germany’s Infineon, the largest chipmaker in its home country, is also constructing a third wafer fabrication facility in Malaysia.

Ringgit’s Favorable Position Attracts Investments

In addition to its skilled labor force and established infrastructure, Malaysia’s relatively low operating costs and the ringgit’s current position against other currencies have further enhanced its appeal to foreign investors.

Focus on “Front End” Chip Manufacturing

While Malaysia has traditionally focused on the “back end” of semiconductor manufacturing, the government is now actively pursuing investments in the “front end” processes, which involve wafer fabrication and photolithography. A national semiconductor strategic taskforce has been established to support this effort.

U.S.-China Tensions Drive Investment

The ongoing tensions between the U.S. and China have fueled the semiconductor industry’s desire to diversify operations. Countries like India and Japan are also investing heavily in the sector, aiming to become major chip hubs alongside the U.S., Taiwan, and South Korea. China’s own semiconductor shortage has also increased interest in alternative suppliers.

Malaysia’s Brain Drain Challenges

Despite its advantages, Malaysia faces the challenge of brain drain as skilled workers seek better prospects elsewhere. The country must prioritize upskilling its workforce and creating an environment that encourages highly skilled individuals to return and contribute to the national economy.

Conclusion

Malaysia’s strategic location, skilled talent, and supportive government policies have made it a prime destination for semiconductor manufacturers amid the global tech war. The country is poised to play a key role in the future of the semiconductor industry, balancing investments in “back end” and “front end” processes while addressing the challenges of brain drain.

Data sourced from: cnbc.com