The New Era of Malaysia’s Semiconductor Industry

May I thank Malaysia Semiconductor Industry Association and SEMICON Southeast Asia for generously inviting me to deliver a closing speech at the SEMICON Southeast Asia 2024. Your effort in bringing together so many like-minded industry leaders is commendable. 

Let me put it this way, Malaysia’s semiconductor industry is now very different compared to just three days ago as Prime Minister Datuk Seri Anwar Ibrahim has set a clear vision and deliverables for a new era. 

The Prime Minister said, “Our vision is to create an ecosystem driven by dynamic Malaysian firms and world-class talent – while partnering with global companies – to compete regionally and globally based on innovation and creativity.” 

This will be achieved through the National Semiconductor Strategy’s three phases, namely, 

Phase 1 – Building on our foundations 

Leveraging on Malaysia’s existing capacity and capabilities to support the modernisation of OSAT with moves towards Advanced Packaging; grow existing fabs in Malaysia and pursue FDI on expanding capacity in trailing edge chips, particularly Power Chips; as well as develop local chip design champions. 

Phase 2- Moving to the frontier 

Pursuing cutting edge logic and memory chips design, fabrication, and testing and looking to integrate the purchasers of these chips. Once Phase 1 is implemented, more leading advanced chips manufacturers will be attracted to our shores.

Phase 3 – Innovating at the frontier 

The next phase is to continue doubling down by supporting the development of world-class Malaysian Semiconductor Design, Advanced Packaging and Manufacturing Equipment firms, while at the same time attracting the buyers of advanced chips to pursue advanced manufacturing in Malaysia

Let me explain why Prime Minister Anwar’s speech and the approach of the Malaysian Government has created conditions for a new era for the semiconductor industry. 

1. Recognising the strategic role of the Government 

      Unlike the steel or automotive industries in which the Ministry of Investment, Trade and Industry (MITI) regulates, Malaysia had previously treated investment into the semiconductor industry as a private investment, mostly handled by Malaysia Investment Development Authority (MIDA). 

      The strategic role of the Government in the semiconductor industry has only been introduced very recently through: 

      • The establishment of the National Semiconductor Strategic Task Force in February 2024, and,  
      • The decision to introduce the National Semiconductor Strategy by Prime Minister at the National Investment Council on 16 April, which was unveiled on 28 May.  

      Semiconductor is the new oil. On the one hand, it means wealth. On the other hand, it is potentially a source of conflict. The Government has a role to manage semiconductor diplomacy, and as pointed out by Prime Minister Anwar, “I offer our nation as the most neutral and non-aligned location for semiconductor production, to help build a more secure and resilient global semiconductor supply chain.” 

      The Malaysian Government will attempt to ensure supply chain resilience and security, apart from strengthening the already strong domestic supply chain, facilitate easy regional sourcing alternatives, conducive trade agreements and lowering of trade barriers for inputs. 

      2. Recognising the need to grow Malaysian technology companies alongside FDI 

      As the semiconductor industry was previously treated as private investment, FDI was the main driving force. The second take-off of the semiconductor industry cannot rely on FDI alone. South Korean scholar Professor Kuen Lee’s assessment of Taiwan, Shenzhen and Penang in their localisation of innovation capabilities is a lesson that we must heed. Penang is lacking behind Shenzhen in terms of creating domestic technology giants. Therefore, it is crucial to ensure that FDIs work with Malaysian firms to build technology and innovation.

      To that end, Prime Minister Anwar envisages that there will at least 10 Malaysian technology companies with revenues between RM1 billion to USD 1 billion, and at least 100 semiconductor-related companies with revenues close to RM1 billion (USD210 million). Prime Minister Anwar also touched on making Malaysia the R&D Hub: “Develop Malaysia as a global R&D Hub for Semiconductors, featuring world-class universities, corporate R&D, and centres of excellence, blending the very best of Malaysian and international talent.” 

      3. Recognising that the semiconductor as the most advanced industry which must pay more for skills and talents 

      In his speech, Prime Minister Anwar is committed to training 60,000 engineers to steer the exponential growth of the semiconductor industry, and at the same time he calls for higher wages for Malaysians in the industry. 

      The semiconductor industry is the most advanced industry in Malaysia and therefore should pay for skills and invest in talents.  The Government will work with firms to identify gaps in the talent pool and ensure the sufficient provision of high-quality talent at commensurate pay to grow the industry and the incomes of Malaysians.

      Malaysia has no shortage of talents but many of them are currently working in Singapore. A virtuous cycle of higher wage, higher productivity and higher technological adoption will further strengthen Malaysia’s position in building a sticky, secured and dynamic supply chain. 

      4. Recognising that ecosystem is what attracted most companies to Malaysia and government’s role in providing enablers

      Most existing semiconductor investors in Malaysia share a similar view: Malaysia’s most important attraction is its ecosystem, especially the thousands of metal fabrication/precision engineering/equipment firms. The Netherlands pursued a “equipment-led” strategy to build its semiconductor industry around ASML. Equipment makers constitute a significant number of existing Malaysian technology firms with a revenue between RM100 million to RM1 billion.

      We will actively look out for ways to strengthen the ecosystem further, which will include attracting investments in specialty chemicals and critical materials, as outlined in the New Industrial Master Plan 2030. 

      Prime Minister Anwar touched on the Government’s plan to make renewable energy more easily available through Third Party Access, starting from September 2024. 

      To make Malaysia a strong global semiconductor hub, we will also work on “collective action problems”, such as: 

      • Industrial standards
      • 5G networks
      • Common wastewater treatment
      • Waste
      • Consistency and quality provision of water and electricity
      • Public transport for workers
      • Decent and affordable housing for Malaysian workers and engineers (can be provided as rental to avoid creating a property play) etc. 

      As I officially close the SEMICON Southeast Asia 2024, I hope all of you are happy with the promised new era for the Malaysian semiconductor industry, and satisfied with the exchanges we had over the past few days. 

      Prime Minister Anwar has not just shown the future for the Malaysian semiconductor industry but has pointed to a path for the future that doesn’t have to be bifurcated in the current geopolitical competition. Malaysia offers hopes for a middle ground for geopolitics, and a fertile ground for the most important global industry of our time – the semiconductor industry – to grow healthily and in the most resilient and secure manner. 

      Speech by Liew Chin Tong, Deputy Minister of MITI, at the SEMICON Southeast Asia 2024

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