MEMS and Sensors

How Malaysia is gearing up to be the next big chip hub

31 May 2024
Intel is one company already investing in Malaysia by expanding its 3D advanced packaging facility. The country is wooing others to come and build in the region. Source: Intel

To take advantage of the growing semiconductor supply chain, Malaysia is investing more than $100 billion and training 60,000 engineers to become the next chipmaking hub.

The southeast Asian country is looking to join the U.S., Japan, Canada and Europe in increasing semiconductor manufacturing to not just take advantage of the market that is set to grow over 5% in the next decade but also as an effort to stabilize the semiconductor supply chain.

Currently, Malaysia accounts for about 13% of the semiconductor test and packaging market and the region already boast numerous major chipmakers with fabs and R&D facilities. In the past year, Infineon made plans to expand its silicon carbide (SiC) fab in Kulim, Malysia while Micron is investing $1 billion to expand its Batu Kawan assembly and test factory. Bosch also opened up a test center in Penang, Malaysia, back in August of 2023. Intel also is expanding its 3D advanced packaging facility in the country with a $7 billion investment.

Just this week, Google said it would invest $2 billion in Malaysia to develop its first data center and Google Cloud region in the country. This would help the region’s goals to boost AI capabilities and other advanced technologies.

Malaysia is seeking at least 10 local companies in design and advanced packaging for semiconductor chips and is allocating billions of dollars for the expansion of these companies. Additional efforts will include building new tech campuses and offering incentives for other foreign companies to build new facilities in the region.

The investment will initially cover about $5 billion over the next five to 10 years with more investment in later years. This will include the training of 60,000 high-skilled local chip engineers to work in the new factories that will be emerging.

Why it matters

Regional semiconductor manufacturing has become a significant trend globally after the COVID-19 pandemic revealed the problems with chipmaking being aggregated in principally three countries — Taiwan, Korea and China. COVID-19 lockdowns caused the semiconductor supply chain to go into shortage specifically in the automotive sector and other regions.

The hope is that if the supply chain is expanded to other regions, if another pandemic or geopolitical event hits, semiconductors will be more resilient and stave off such a multi-year shortage.

Other benefits to the expansion of domestic chip manufacturing include:

  • Boosting national security
  • Boosting national economy
  • Incentivize foreign investment
  • Incentivize R&D
  • Grow the engineering workforce

The U.S. is on track to grow 203% over the next decade, which will be the largest increase in the world over this time, according to the Semiconductor Industry Association. Europe is seeking to manufacture about 20% of global semiconductor manufacturing in the next decade. Japan also has bolstered its regional manufacturing with subsidies given to TSMC, Rapidus and other companies to expand chip fabs in the country.

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