New Model to Move Malaysia Up the Global Semiconductor Value Chain

Semiconductors are the most strategic goods of our time, akin to the new oil. Although one would assume that such a strategic sector would attract a lot more attention, up until recently it was only treated as a private investment, with Malaysia Investment Development Authority (MIDA) taking up the minimal role of a facilitator. Now, the Government is changing the situation.

At the National Investment Council chaired by Prime Minister Datuk Seri Anwar Ibrahim in January this year, MITI Minister Tengku Zafrul Aziz proposed the formation of a National Semiconductor Strategic Task Force which will provide a whole-of-government thinking towards the industry. The Council accepted the proposal, and we are moving away from the old model. We are now working towards moving Malaysia up the global semiconductor value chain.

When I was in Detroit for the APEC Ministers Responsible for Trade (MRT) Meeting in May 2023, the United States Commerce Secretary Gina Raimondo informed us that when Malaysian factories shut down during the Covid-19 pandemic’s movement control order (MCO), the automotive industry in Detroit had to shut down too due to the shortage of chips.

This shows how connected the Malaysian and US supply chains is. Yet, many do not realise that Malaysia contributes to a very sizable 23% of US semiconductor trade. Malaysia is also the world’s sixth largest semiconductor exporter.

At the same time, in the context of the Indo-Pacific Economic Framework (PEF), I understand that the US political situation makes it quite impossible to discuss traditional trade deals with market access. However, I believe that the US and Malaysia, as well as other Southeast Asian IPEF partners, should explore collaborations through the States’ industrial policies such as the CHIPS Act which stands for Creating Helpful Incentives to Produce Semiconductors, and the Inflation Reduction Act (IRA).

Given the significant size of Malaysia-US semiconductor trade, both countries should seriously look into building a bilateral semiconductor diplomacy programme.

It is also important to remember that the signing of the Memorandum of Cooperation on Semiconductor Supply Chain Resilience between Malaysia and the US in 2022 was a significant milestone for our collaboration in this field. And definitely, more has to be done.

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