Why has Malaysia become a beacon in the Malaysia semiconductor landscape? As the world becomes increasingly reliant on digital technologies, the semiconductor industry in Malaysia is experiencing unprecedented growth. Serving as a key exporter and a hub for production, this article delves into the critical elements that contribute to Malaysia’s success story and the challenges it must navigate. Expect to uncover the drivers behind the industry’s expansion, the role of local and international players, and strategic government initiatives that bolster Malaysia semiconductor growth.
Key Takeaways
- Malaysia holds a vital position in the global semiconductor industry, specializing in assembly, packaging and testing, with the E&E sector accounting for 40% of its exports and Malaysia being the largest exporter of electronics to the US with a 20% market share.
- The Malaysian semiconductor landscape is bolstered by the presence of multinational companies like Intel and Infineon Technologies as well as local firms, contributing to its significant role in semiconductor manufacturing and innovation.
- The industry faces challenges such as a workforce deficit, particularly in engineering, and infrastructural issues, but it also has opportunities for growth due to rising demand in areas such as electric vehicles, IoT applications, and a shift in supply chains due to US-China trade tensions.
Malaysia’s Role in the Global Semiconductor Industry
Malaysia’s semiconductor industry holds a competitive edge in the global market, specializing in packaging, assembly, and testing services. The country’s strategic location in Southeast Asia, coupled with its robust infrastructure, has attracted a diverse range of local and foreign businesses. This vibrant sector represents approximately 25% of Malaysia’s GDP, emphasizing its importance to the national economy.
Despite the absence of silicon wafer processing plants, Malaysia has emerged as the largest exporter of electronics to the US, holding a 20% market share. This resilience can be attributed to the country’s sound governance, stable workforce, and ability to adapt to changing global market dynamics. The sector’s success, driven by the electronics and electrical (E&E) industry, accounts for 40% of Malaysia’s export output and drives 13% of the world’s back-end semiconductor production.
Strategic Location
Malaysia’s geographical advantage cannot be understated when it comes to the success of its semiconductor industry. Penang and Kulim, Kedah, have emerged as hubs for semiconductor industries, with well-established ecosystems since the 1970s. These areas, along with Kuala Lumpur, are renowned for their electronics and electrical clusters, further solidifying Malaysia’s strategic position in the semiconductor manufacturing sector.
The strategic use of incentives by the Malaysian government has been instrumental in cementing the country’s role as a semiconductor hub within the Asia-Pacific region. Coupled with the country’s geographic position in Southeast Asia, it has become an ideal location for the growth and expansion of the semiconductor industry.
Infrastructure and Facilities
While location plays a crucial role, the growth of Malaysia’s semiconductor industry is equally dependent on its expanding infrastructure and facilities. A shining example of this expansion is the new AT&S facility in Kulim’s industrial park, which is expected to operate at full capacity, significantly bolstering Malaysia’s semiconductor production capabilities.
Another testament to Malaysia’s growing strength in semiconductor manufacturing is Infineon Technologies AG’s investment. The company has established the world’s largest 200mm silicon carbide power fabrication plant in the country. Simultaneously, local companies like MQ Technology are demonstrating their competencies by specializing in automation equipment for semiconductors, thereby contributing to the robustness of the industry.
Key Players in Malaysia’s Semiconductor Landscape
The Malaysian semiconductor landscape is characterized by an array of specialized expertise and capabilities. A blend of multinational and local companies drive innovation and production, thereby enhancing the country’s semiconductor prowess. Companies like Infineon Technologies, Renesas, and UMC Semiconductor offer a range of services from power semiconductors, automotive electronics, to wafer fabrication services.
Local subsidiaries like Altera Corporation (now part of Intel) and local firms such as Frontken Corporation and Elsoft Research play a crucial role in enhancing the semiconductor manufacturing process. Even smaller firms such as SRM, FoundPac, and MQ Technology provide innovative solutions and manufacturing expertise, contributing to the overall robustness of Malaysia’s semiconductor industry.
Multinational Companies
Multinational companies have established a strong presence in Malaysia, contributing significantly to the country’s semiconductor prowess. Industry giants like Intel are expanding their presence in Malaysia’s electrical and electronics manufacturing sector, highlighting significant industry collaboration and suggesting the potential for cultivating a skilled workforce.
Other notable companies like Broadcom have established manufacturing facilities in key Malaysian locations like Penang and Melaka. Intel’s significant presence in Malaysia is a testament to the country’s prowess in semiconductor manufacturing.
Local Malaysian Companies
While multinational companies play a significant role, the contributions of local Malaysian companies to the semiconductor industry are equally noteworthy. Companies such as Inari Technology and Globetronics Technology have made significant achievements in the industry, with the former specializing in radio-frequency (RF) and optoelectronic products, and the latter excelling in sensor-based devices and optoelectronics.
Other local companies like ITW ECPS and Malaysian Pacific Industries also contribute to the semiconductor ecosystem with their experience and diverse product portfolios. The growth and success of these local companies attest to the overall growth of Malaysia’s semiconductor industry, making it a vital sector for the country’s technological progress and economic development.
Malaysia’s Semiconductor Workforce and Education
A crucial aspect of Malaysia’s semiconductor industry is its workforce and education. The industry is currently facing talent shortages, with a significant deficit of engineers who comprise 65% of the shortage. This shortfall poses a challenge as engineers form the backbone of Malaysia’s semiconductor industry.
However, initiatives and collaborations have been put in place to bridge this gap. By partnering with academic institutions and fostering industry-academia dialogues, Malaysia’s semiconductor industry is taking significant steps to nurture talent and ensure a steady supply of skilled workers.
Engineering Graduates
The demand for engineering graduates in Malaysia’s semiconductor industry outpaces the number of graduates produced by local universities. The annual need for electrical and electronics engineers in the industry stands at 50,000. In contrast, local universities churn out approximately 5,000 engineering graduates annually.
This discrepancy between the number of engineering graduates and the industry’s demand has led to a significant skilled workforce shortage in Malaysia’s semiconductor sector. However, efforts are being made to bridge this gap and ensure a steady supply of qualified engineers for the industry.
Collaboration with Industry Players
Collaborations between industry leaders and academic institutions play a crucial role in fostering a skilled workforce for Malaysia’s semiconductor sector. For instance, Infineon Kulim has formed educational partnerships with institutions such as OTH Regensburg University in Germany, Universiti Tunku Abdul Rahman (UTAR), and Universiti Sains Malaysia (USM) to produce industry-ready talent.
These collaborations, ongoing for more than a decade, provide students with industry insights and a holistic learning experience, exemplifying successful long-term industry-academic collaboration. They play a crucial role in fostering an environment that encourages innovation and strives for excellence in Malaysia’s E&E sector.
Challenges and Opportunities Facing Malaysia’s Semiconductor Industry
Despite its successes, the semiconductor industry in Malaysia faces several challenges. From a 60% rise in land prices in Penang over two years leading to traffic congestion and infrastructural issues to the need to improve its competitive environment, the industry has its fair share of hurdles to overcome.
However, these challenges are not insurmountable, and the industry also presents several opportunities. Some of these opportunities include:
- The trade tensions between the US and China, which can create new market opportunities for Malaysia’s semiconductor industry.
- The growing demand for electric vehicles, which requires semiconductor components.
- The increasing use of IoT applications, which also rely on semiconductors.
These factors can be leveraged by Malaysia’s semiconductor industry for growth and expansion.
Trade Tensions and Supply Chain Disruptions
Trade tensions between the United States and China have inadvertently benefited Malaysia’s semiconductor industry, also known as the chip industry. Companies are strengthening their supply chains by expanding operations in Malaysia, enhancing the country’s importance in the global semiconductor industry.
Malaysia’s strategic advantages in supply chain security and resiliency are attracting major EV manufacturers. This ‘Plus One’ location strategy has led to semiconductor companies establishing several logistics centers, including a secondary supply chain in Malaysia, further enhancing the country’s importance within the global semiconductor industry.
Growing Demand for Electric Vehicles and IoT Applications
The burgeoning demand for electric vehicles and IoT applications presents significant opportunities for Malaysia’s semiconductor industry, as well as the chips industry. Electric vehicles require up to 15,000 chips each, significantly more than traditional vehicles, leading to an increased demand for semiconductors.
EV manufacturers are sourcing components from Malaysia in substantial quantities and are looking to expand their presence in the electronics industry. This growing market coupled with the National Industrial Master Plan’s ambitions to manufacture an electric vehicle locally and transform factories into smart factories will contribute to an increased need for semiconductors.
Government Initiatives and Support for the Semiconductor Industry
The Malaysian government is not a silent spectator in the growth of the semiconductor industry. It has launched numerous initiatives and collaborations to bolster the industry’s expansion and attract foreign investors.
These government initiatives include:
- Nurturing local technology companies
- Offering tax incentives
- Strengthening the country’s semiconductor industry
- Making it an attractive destination for foreign investments.
New Industrial Master Plan
The New Industrial Master Plan (NIMP) 2030 aims to bolster the economic sector, targeting an annual increase of the manufacturing sector’s GDP contribution by 6.5%. It outlines strategies to bolster the semiconductor industry, such as investing in sophisticated manufacturing and attracting foreign investments.
The Malaysian government is introducing investment incentives and plans to facilitate the semiconductor and electronics sectors. It is focusing on developing clusters, inclusivity, and ESG practices, thereby reinforcing its commitment to the growth of the semiconductor industry.
Collaboration with Foreign Players
Collaborations with foreign players play a critical role in strengthening Malaysia’s position in the global semiconductor industry and attracting further investments. Penang, for instance, has attracted $12.8 billion in foreign direct investments as companies establish manufacturing facilities in Malaysia.
The geopolitical landscape and trade tensions have positioned Malaysia as an attractive alternative to China for American contractors. Western companies are seeking to reduce dependence on China by moving operations to Malaysia, thereby enhancing Malaysia’s importance in the global semiconductor industry.
The Future of Malaysia’s Semiconductor Industry
The future of Malaysia’s semiconductor industry looks promising, with the country aiming to achieve RM120 billion in GDP growth and RM495 billion in export earnings by 2025 from the E&E sector. With the global recovery trends in the industry, Malaysia’s semiconductor sector is expected to see considerable growth starting from the second half of 2024.
The transformation into a smart manufacturing sector by 2025, as part of national policies like Industry4WRD, signifies the country’s commitment to keeping pace with advancements in the industry.
Expanding Front-End Activities
Malaysia aims to become a high-value-added semiconductor producer with a complete range of activities in the value chain, including chip assembly. A new national semiconductor taskforce has been established to facilitate the country’s move up the value chain in the semiconductor industry.
This ambition necessitates the cultivation of local talent in integrated circuit design, engineering, and semiconductor assembly to support advancing operations in MNCs. This focus on expanding front-end activities is crucial to ensure the sustainable growth of Malaysia’s semiconductor industry.
Embracing Industry 4.0 Technologies
Embracing Industry 4.0 technologies is a key part of Malaysia’s future plans for the semiconductor industry. Some examples of these technologies include:
- Artificial intelligence
- Cloud computing
- Internet of Things (IoT)
- Big data analytics
Nvidia’s collaboration with Malaysia’s utilities conglomerate to create an artificial intelligence cloud and supercomputer center signifies this trend.
The adoption of advanced technologies like smart factories, cyber-physical systems, and 3D printing into its semiconductor manufacturing process is expected to generate 1.3 million new jobs by 2025. This transformation will undoubtedly create abundant job opportunities and help the local semiconductor industry fully embrace Industry 4.0 technologies.
Summary
This exploration of Malaysia’s semiconductor industry has offered a comprehensive overview of the sector’s growth, key players, opportunities, and challenges. From a strategic location and robust infrastructure to the presence of global and local industry players, Malaysia has solidified its place in the global semiconductor landscape. Despite challenges such as talent shortages and trade tensions, the country has leveraged these as opportunities, attracting foreign investments and fostering growth.
As we look to the future, Malaysia’s semiconductor industry is poised for further growth. With a focus on expanding front-end activities and embracing Industry 4.0 technologies, the industry is set to maintain its competitive edge and create numerous job opportunities. Through strategic initiatives and resilient adaptability, Malaysia’s semiconductor industry continues to surge forward, contributing significantly to the country’s economic growth and technological progress.
Frequently Asked Questions
How big is Malaysia semiconductor industry?
The semiconductor industry in Malaysia is significant, as the country controls 13 percent of the global market for packaging, assembly, and testing services for semiconductors and ranks as the world’s sixth-largest exporter of semiconductors.
What is the semiconductor Association in Malaysia?
The semiconductor association in Malaysia is the Malaysia Semiconductor Industry Association (MSIA), which covers individuals and companies involved in the semiconductor industry and related supply chain and services.
Which country is best in semiconductor?
Taiwan is the best country in semiconductor production, with Taiwanese TSMC leading as the largest producer of advanced semiconductors. Other significant players include South Korea, China, the United States, Japan, Germany, and Israel.
Who are the key players in Malaysia’s semiconductor industry?
The key players in Malaysia’s semiconductor industry include multinational companies like Intel and Broadcom, as well as local companies such as Inari Technology and Globetronics Technology.
What are the challenges facing Malaysia’s semiconductor industry?
The semiconductor industry in Malaysia is facing challenges including a shortage of skilled engineers and infrastructural issues due to increasing land prices. It is important to address these issues to ensure the industry’s growth and sustainability.