Malaysia’s Next Semiconductor Leap: Elevating Malaysia’s Semiconductor Value Chain

It is a great pleasure to join you today at the Bursa Malaysia–CITIC CLSA Semiconductor Forum.

This gathering takes place at a turning point for our nation. The semiconductor industry is no longer just Malaysia’s largest export sector; it has become a central flashpoint in global geopolitics. As the primary enabler of the AI revolution and the transition to a green economy, semiconductors are the bedrock of the modern world and Malaysia, with its 50 years as a key player in the supply chain, has a chance to be part of this not as a spectator, but as a key enabler.

The industry is experiencing a rare supply chain reorganisation drive, motivated by sovereignty considerations and the principle of “just in case”. As global players seek to de-risk and find alternative sources away from contested theatres in North Asia, Malaysia is perfectly positioned to catapult itself into a higher-value segment of the industry. We must act now, for once these new supply chain partners are established, they will be nearly impossible to displace.

The government approach has been three-pronged. The first represents a move along the smiley curve towards higher value activities such as design, R&D and deep-tech start-ups. Initiatives such as InvestPenang’s Silicon@5km, SIDEC’s IC design parks, Arm CSS tokens and MTDC’s SemiconStart are already laying the groundwork. Meanwhile we must not forget nor ignore our strengths at the bottom of the curve: 50 years of deep implicit knowhow in assembly, test and packaging.

Here the market dynamics are clear: there is a significant gap in the market for advanced packaging. With overflowing capacity in Taiwan and the US ecosystem requiring some time to build, there is a window of opportunity for Malaysia. This brings us to our second approach, which is spearheaded by MOSTI’s co-funding of the Malaysian Advanced Packaging Consortium to seed this ambition. Meanwhile the Northern Corridor Investment Authority (NCIA) is establishing the Advanced Packaging Institute and Research Centre (APIRC).

The third approach leverages our strengths in equipment and automation. Here the barriers to entry are lower and we have a plethora of companies of all sizes that are focused primarily on the back-end of semiconductor manufacturing. Our semiconductor manufacturing equipment sector are already certified global tech leaders but require support structures and capital to strengthen their positions in the global arena through the development of patented processes. All these require cross border capital, export financing and dual IPO pathways. InvestPenang has led the initiative in this sector with the establishment of the Penang ATE campus, inspired by Brainport Industries of Eindhoven, to provide support for a push into higher value markets.

While the journey isn’t easy, it is an opportunity we have to take using a whole-of-government approach. I am happy to see the capital market stakeholders coming together today to solve funding bottlenecks that are facing Malaysia’s semiconductor firms as they rise to this challenge. It is my wish that all of us here can put our minds together to address three critical capital bottlenecks: deep capital, smart capital and strategic capital.

First: Deep capital. Tech hardware is prohibitively capital intensive, creating high barriers to entry. In this industry, capital buys more than equipment – it buys technology and know-how. Manufacturing facilities alone cost billions of ringgit, while design prototypes can cost up to hundreds of millions to produce. Our Bursa “tech greats” are small compared to global giants who have deep pools of cash at their disposal, which is deployed on R&D to widen their moats. Meanwhile the cost of machinery and equipment also presents a meaningful technology barrier, without which companies cannot move into higher value markets. For example, ASML’s DUV machine defined TSMC’s technology capability. Hence our industry must be tactical and find their niche. An IPO should not be an end goal, but a stepping stone to global scale. It must be properly priced to provide the quantum of funds required for companies to realise the national ambition.

Second: Smart capital. Malaysia is endowed with world class talents who are creating products and solving engineering challenges among the most highly coveted semiconductor greats both in Malaysia and worldwide. Silicon Valley and other major tech hubs are thriving with deep-tech driven start-ups. Professors, students and employees take the leap into entrepreneurship as it is a well-trodden path that is sufficiently-oiled with smart capital – investors who understand the industry’s nuances and are able to shape the commercially successful companies.

Third: Strategic capital. The semiconductor industry supply chain is highly complex and widely diversified across companies and geographies. Behind every product lies thousands of parts, designed and manufactured by hundreds of firms buttressed by tens of IPs. To stay ahead, firms need more than just money; they need “strategic capital” from investors who provide a stamp of approval, open doors or create opportunities.

The most glaring challenge we face is that despite 50 years in the industry, Malaysia has yet to develop deep semiconductor expertise in its private capital markets. The markets that are supposed to fuel technological development through the deployment of private capital, is at its infancy. We must rectify this, as without integrating technology and capital, “smart” and “strategic” funding cannot exist, and deep capital will be difficult to deploy – local tech champions cannot grow.

Successful deep tech funds result from the amalgamation of years of finance and industry experience. Many are funded by tech companies themselves, carrying the knowhow that allows them to make swift decisions backed by a deep understanding of the sector. Malaysia has yet to develop a thriving ecosystem of such capital markets players.

Silicon Valley provides a successful model of how this integration can be achieved. Financiers, corporates, academics and technopreneurs live and work in close proximity. Ideas are discussed, tested and shaped early on with the right enablers: technology, capital and market demand. This derisks start-ups, allowing for swifter and more informed investment decisions. Improved industry knowledge also derisks the capital side of the equation. Large companies will also benefit, given financiers understand and can adequately price risks.

And this is what Malaysia needs. A deeper integration between capital markets and tech, forged through geographical proximity, forged by establishing a capital markets hub right in the centre of our tech industry, Malaysia’s Northern region. We should leverage our latent assets – ex-semiconductor CEOs, CFOs, regional directors, country managers, R&D directors, etc – hiring them into the financial sector to provide the deep insights required to monetise the opportunity that Malaysia sees before it today.

The numbers are clear. While E&E contributes 40% of exports, the value capture is merely 6% of GDP, meanwhile listed semiconductor companies make up only 1.7% of Bursa Malaysia’s total market cap. It is time the capital markets make it a national mission to grow indigenous technology companies and cement Malaysia’s market position – a path that South Korea and Taiwan have successfully paved.

It is useful to note that GDP per capita between South Korea and Malaysia was roughly comparable in the 1960s. South Korea is now a high income technology nation through focusing on local chaebols. Meanwhile Taiwan developed to become a prominent semiconductor player by focusing on technology as a national mission, leveraging its human capital to build local champions such as TSMC, Mediatek, ASE and Foxconn. The strategy is clear, targeted and coordinated support at developing local capabilities.

We need smart, strategic and deep capital to reward those firms that take the right risks. This includes investing into talent and machinery to develop capabilities, R&D to develop a moat and embarking on well-targeted acquisitions to save years of R&D and market development. Malaysia can no longer afford to play the low cost game, figuratively and literally. As we aspire to be a high income nation, we need to focus on lifting the ceiling. We can no longer support nor welcome activities that compete mainly on how cheaply we can produce, but rather how capable, fast, precise and reliable.

Today we are no longer talking about competition among firms. As John Blankendaal from Brainport Industries put it, we have entered an era of competition between supply chains. This means that in the world of semiconductors, no firm can make it alone. We have entered an era of collaboration where we build strength through partnerships. ASML, the world’s only producer of EUV lithographic machines, controls the market for leading edge chips precisely because of the strength of its supply chain that solves engineering and tech challenges together.

Malaysia has demonstrated that it is a reliable supply chain partner. Our neutrality, high value talent and ecosystem are among our best assets today. Together with support from the capital markets, we need to also be a resilient supply chain node, through the development of a local ecosystem that relies less on imported technologies and capabilities. We are known as masters of copy exact and better. But we need to push for more than this. We need to be the preferred partner in resolving engineering challenges and be active participants in product development.

Building the Future Together. Ladies and gentlemen, the next semiconductor leap cannot be achieved by government, industry or investors alone. Success requires partnership. The government has provided the vision, policy support and enabling infrastructure. Industry must continue investing in innovation, talent and technological capability. Universities and research institutions must help create new knowledge and new ideas. Meanwhile investors and capital markets must provide the long-term capital required to transform promising companies into global champions.

This is where Bursa Malaysia and institutions such as CITIC CLSA have an important role to play in providing the three types of capital. Industrial strength will ultimately be a reflection of capital market strength. We want to see more semiconductor companies, both domestic and foreign, accessing public markets, attracting investment and creating wealth that remains within Malaysia.

The opportunity has been presented to us, 50 years of building up to this moment in time. Will we grasp this and together give it our all, or look back with regret at a golden opportunity lost? The choice is made in the decisions and efforts we make every day.

This is my keynote address delivered at the Bursa Malaysia Sectoral Series “Malaysia’s Next Semiconductor Leap: Elevating Malaysia’s Semiconductor Value Chain” organised by Bursa Malaysia on Tuesday, 28 July 2026 at Bursa Malaysia.