Penang: Malaysia’s High-Tech Powerhouse

Last month, I led a 40-person delegation, which included important Southeast Asian regional economists and senior government and GLICs (government-linked investment corporations) officials, to visit semiconductor firms in Penang and Kulim, Kedah to enhance the understanding of this globally relevant cluster. On the factory floor of a major Malaysian-owned equipment company that exports custom-made high-end robotic factory lines overseas, a senior multilateral bank official who is also a personal friend suddenly said to me, “now I understand where your optimism about the future of Malaysia comes from.”

He explained that if one lives in Kuala Lumpur and listens to negative vibes, one would not have expected that Malaysian technologies and capabilities have reached such complexities and connected to the global supply chain in such a meaningful manner that is not just at the low end, but at the upper middle level.

My friends and those who have been reading my writings would know that I am very optimistic about Malaysia’s future. It is not that I am not aware of the difficulties of changing the old paradigms. It is also not that I am naive about the challenges we are facing in a world that is darker than the previous decades.

We should know that Malaysia’s endowments include being strategically located in the middle of global trade routes, having a well-educated multilingual workforce and a sizable industrial base.

Malaysia’s first round of export-led industrialisation started in Bayan Lepas in the early 1970s before expanding to Petaling Jaya and Shah Alam, and later Johor Bahru and Seremban, and beyond.

Malaysia experienced massive and exponential growth between 1988 and 1997 thanks to the United States forcing the appreciation of the Japanese Yen in the Plaza Accord in 1985. The Asian Financial Crisis in 1997, the political crisis in 1998 which saw the jailing of Datuk Seri Anwar Ibrahim, and China’s entry into the World Trade Organisation in 2001, have contributed to a 25-year period of relative slow growth.

Due to the current US-China trade war and the reorganisation of the global supply chain, Malaysia now has a once-in-a-generation opportunity to grow at a high speed. I call this “Malaysia’s second takeoff”.

Over the past several months, Malaysia’s semiconductor industry, specifically the Penang-Kulim cluster, has been in the global limelight. Malaysia contributes to 7% of global semiconductor trade, 13% of global backend trade, and 23% of the United States semiconductor trade.

Acknowledging the strength that Malaysia already has, and recognising the window of opportunity for a once-in-a-generation takeoff, our Prime Minister unveiled the National Semiconductor Strategy on 28 May at SEMICON Southeast Asia to signal the Government’s resolve to take the semiconductor industry to newer heights.

Malaysia has a second chance and a small window of opportunity to develop itself into a more dynamic, resilient and “sticky” supply chain that would bring more technology owners to invest here, and to grow more Malaysian technology owners.

Yesterday, I yum cha with YAB Chow Kon Yeow, Chief Minister of Penang. I congratulated him for presiding over the currently most exciting technology hub in Southeast Asia, and for the State Government’s efforts in making Penang a choice location for the semiconductor industry. The recent developments in Batu Kawan are particularly encouraging. 

Chief Minister Chow and I also understand the challenge ahead: to build prosperity based on technology and to make Penang as well as Malaysia a “sticky” semiconductor powerhouse for the next 30 years. We have a 5-to-10-year window to seize the opportunity offered by the once-in-a-generation reorganisation of the global supply chain.

Kuen Lee, a South Korean scholar, has pointed out that compared to Taiwan and Shenzhen, after half a century in the semiconductor sector, Penang has yet to grow sufficient technology firms.

The Prime Minister hopes to address this problem. As mentioned in his speech when launching the National Semiconductor Strategy, Datuk Seri Anwar envisages that there will be at least 10 Malaysian technology companies currently with a revenue of close to RM1 billion will, in the near future, grow to the level of having an annual revenue of USD1 billion.

And, he hopes to create the conditions for at least 100 Malaysian semiconductor-related companies to have a revenue of close to RM1 billion.

This is a big ambition!

The ambition is in line with the Prime Minister’s Madani economic framework of raising the ceiling and raising the floor. To “raise the ceiling”, we would like to see Malaysian firms, including the GLCs and GLICs, move from land and resource-based to technology-based. We want to be a nation getting rich by developing technologies, and not just getting rich by buying and selling lands or oils or minerals. And, with prosperities powered by technologies, we would like to “raise the floor” so that Malaysians get better jobs, better pay, and become a nation of middle class.

Over the years, Penang and Kulim stand out as the magnet attracting global semiconductor manufacturers through three factors:

First, attracting quality FDI investment;

Second, from metal fabrication to sophisticated domestic equipment companies, there is a very strong ecosystem that helps build a resilient supply chain.

Third, Penang’s domestic scene is turbocharged by relentless entrepreneurship. 

The National Semiconductor Strategy is the Federal Government’s effort to raise the game for the semiconductor industry, and to place the attention of everyone including the GLCs and GLICs on the sector.

At the same time, we are clear-eyed. The Penang and Kulim experience will guide us into the future: that we need quality FDIs, we need to build an even stronger ecosystem as today’s corporations care very much about supply chain resilience, and to grow to greater heights, we need to unleash the entrepreneurial spirit in technology.

To that end, the Ministry of Investment, Trade and Industry under the leadership of Minister Tengku Zafrul Aziz and the Government of Malaysia would like you to build a better future for our nation through growing Malaysian technologies, and the prosperities based upon technologies.

Before I conclude, let me say a few words on ASEAN since your conference is on ASEAN and Malaysia will be chairing ASEAN in 2025. During Malaysia’s chairmanship, ASEAN will launch its Vision 2045 document.

In an increasingly difficult and potentially bifurcated global landscape, ASEAN as a non-aligned region is crucial to the world to keep the middle ground around for trade flow and people-to-people exchange.

For global peace, ASEAN and other like-minded countries in Latin America and Africa will have to build a strong global middle ground together. Among ASEAN states, we shouldn’t see each other as competitors. We compleiment each other to create a strong and resilient ASEAN supply chain.

What do we want to achieve with ASEAN?

We want to see ASEAN as a resilient middle class society. China had about 100 million middle class when the country joined the WTO in 2001, and now has at least 400 million people living a middle class life.

ASEAN should envisage that at least 350 million people will live a middle class life by 2045. If ASEAN could achieve that, ASEAN will no longer be a production site alone, we  will also be a very important market for the world.

This was his speech at Invest ASEAN 2024 held in Setia SPICE Convention Centre, Penang on 10th June 2024.

Share this article

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles

The New Johor Prosperity

A new world order is emerging as the old one is crumbling. Understanding the context of the new world order, which comes with a new set of considerations, imperatives and…
Read More

Penang: Malaysia’s High-Tech Powerhouse

Last month, I led a 40-person delegation, which included important Southeast Asian regional economists and senior government and GLICs (government-linked investment corporations) officials, to visit semiconductor firms in Penang and…
Read More

Explaining Malaysia to China: The Five Middles

Getting Malaysians and Chinese to understand each other’s economy is crucial for Malaysia’s future. It is important for Malaysians to understand contemporary China while China’s policy makers and business community…
Read More