{"id":38794,"date":"2024-03-11T16:49:51","date_gmt":"2024-03-11T08:49:51","guid":{"rendered":"https:\/\/investpenang.gov.my\/malaysia-the-surprise-winner-from-us-china-chip-wars\/"},"modified":"2025-11-28T11:23:40","modified_gmt":"2025-11-28T03:23:40","slug":"malaysia-the-surprise-winner-from-us-china-chip-wars","status":"publish","type":"post","link":"https:\/\/investpenang.gov.my\/zh-hans\/malaysia-the-surprise-winner-from-us-china-chip-wars\/","title":{"rendered":"Malaysia: The Surprise Winner from US-China Chip Wars"},"content":{"rendered":"

[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern” el_class=”sec-inner-banner” css=”.vc_custom_1703741584745{background-image: url(https:\/\/investpenang.gov.my\/wp-content\/uploads\/2023\/12\/contact-banner-bg.jpg?id=20253) !important;}” z_index=””][vc_column][vc_row_inner row_type=”row” type=”grid” text_align=”left” css_animation=”” el_class=”inner-banner-row”][vc_column_inner][vc_column_text]<\/p>\n

Malaysia: The Surprise Winner from US-China Chip Wars<\/h1>\n

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11 March 2024<\/p>\n

[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][\/vc_column][\/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”grid” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern” css=”.vc_custom_1703764846254{background-color: #f3f5f8 !important;}” z_index=””][vc_column el_class=”fade-in animate”][vc_empty_space height=”120px” el_class=”height-x120″][vc_row_inner row_type=”row” type=”grid” text_align=”left” css_animation=””][vc_column_inner][vc_single_image image=”30984″ img_size=”full” qode_css_animation=”” el_class=”single-featured-image”][\/vc_column_inner][\/vc_row_inner][vc_empty_space height=”60px” el_class=”height-x60″][vc_row_inner row_type=”row” type=”grid” text_align=”left” css_animation=”” el_class=”content-row”][vc_column_inner][vc_column_text]March 11, 2024 \u2014<\/strong> Tension between Beijing and Washington over access to technology has prompted many companies to open factories in south-east Asia<\/em><\/p>\n

Shortly after a Chinese company opened up nearby, employees at Malaysian contract manufacturer Kemikon walked outside their factory to find sheets of paper stuck to their car windshields.<\/p>\n

The flyers were from Fengshi Metal Technology, a Suzhou-based rival that operates in similar areas of semiconductor equipment manufacturing. They promised salaries 30 per cent above the market rate and other \u201cunique opportunities\u201d including overseas travel and free meals.<\/p>\n

Fengshi is one in dozens of companies setting up or expanding in Penang \u2014 a state in northern Malaysia better known for its beaches, varied cuisine and laid-back atmosphere \u2014 in the past 18 months. Others include American chip giants Micron and Intel and European semiconductor companies AMS Osram and Infineon.<\/p>\n

As companies around the world look for a back-up to China to protect themselves from geopolitical disruptions \u2014 a strategy known as China plus one \u2014 Malaysia is becoming a surprise investment destination.<\/p>\n

It has a 50-year history in the \u201cback end\u201d of the semiconductor manufacturing supply chain: packaging, assembling and testing chips. But it has ambitions to move up to the front end of a $520bn global industry that powers everything from televisions to smartphones and electric vehicles. That includes higher value activities such as wafer fabrication and integrated circuit design.<\/p>\n

The broadening US curbs<\/a> on Chinese technology, especially for chipmaking, are a key reason for neutral Malaysia\u2019s appeal, say industry groups. America is jostling with China for global technology supremacy and has enlisted support from allies in Europe and Asia as it restricts sales of the most advanced chips and manufacturing equipment to its geopolitical rival.<\/p>\n

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Foreign investment pours into Penang<\/p>\n

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\u201cIt\u2019s a rush. It\u2019s not only Chinese companies [setting up in Penang]. It\u2019s Korean, it\u2019s Japanese, and it is western,\u201d says Marcel Wismer, Kemikon\u2019s chief executive. \u201cAnd all of this is related to the tech war between the US and China.\u201d<\/p>\n

Kemikon builds parts, such as machine frames, for clients including LAM Research and Applied Materials in the US. Fengshi is not the only Chinese company to try to poach his employees, Wismer says.<\/p>\n

He adds that major western semiconductor equipment manufacturers cannot sell their most advanced equipment to China because of US restrictions. \u201cBut the other part of the story is all of these manufacturers source parts from Chinese companies,\u201d he explains.<\/p>\n

\u201cSo they tell their suppliers: if you don\u2019t move out [of China], we have to find new ones. Chinese companies are then forced to move or expand to places like south-east Asia so they don\u2019t lose business. That is where Penang comes in.\u201d<\/p>\n

Investment is booming. The state attracted RM60.1bn ($12.8bn) in foreign direct investment in 2023, more than the total it received from 2013 to 2020 combined.<\/p>\n

Developing Malaysia\u2019s semiconductor industry and workforce into this higher value manufacturing is a \u201ccritical goal,\u201d says prime minister Anwar Ibrahim<\/a> in an interview with the Financial Times.<\/p>\n

Malaysia is at \u201ca very critical moment, a departure from our history,\u201d he says, while looking across one of Penang\u2019s factory floors. A native of the state, he admits to being personally proud at its boom.<\/p>\n

But the narrative has distinct vulnerabilities. These include a severe talent shortage and a failure to create a domestic semiconductor champion that can draw in others.<\/p>\n

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The semiconductor manufacturing supply chain is a key target of Prime Minister Anwar Ibrahim\u2019s industrial plan as he focuses on reviving Malaysia\u2019s economy \u00a9 Julia Bellack\/FT<\/em><\/p>\n

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Another is politics. Washington has already put pressure on Kuala Lumpur for \u201ctilting<\/a>\u201d towards Beijing under Anwar, who took office in 2022. The US, the biggest contributor to Malaysia\u2019s FDI, may clamp down further on Chinese technology; some analysts and industry groups fear it may restrict products and equipment built in Malaysia by the flood of new Chinese companies.<\/p>\n

But Gautam Puntambekar, country executive for Bank of America, says that \u201cwhen you talk about semiconductors, Malaysia is invariably part of the conversation\u201d.<\/p>\n

\u201cSupply chain diversification from China remains a top focus for companies,\u201d he says, adding that this will only speed up ahead of elections in 2024 and makes Penang \u201cone of the most interesting spots in Asia right now\u201d.<\/p>\n

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_____<\/b><\/p>\n

In 1972, a muddy<\/strong> paddy field in Penang became the first production facility outside the US for Intel. Lured by a new free trade zone and a busy shipping port in the Malacca Strait, Intel, alongside AMD, Renesas (formerly Hitachi), Keysight Technologies (formerly Hewlett-Packard) and several other tech multinationals were the pioneers of what used to be called the \u201cSilicon Valley of the East<\/a>\u201d.<\/p>\n

Malaysia became a well-oiled machine in the packaging assembly and testing of chips, until recently considered a fairly low-end, labour intensive but necessary part of the semiconductor manufacturing supply chain.<\/p>\n

It is already the world\u2019s sixth largest semiconductor exporter and holds 13 per cent of the global semiconductor packaging, assembly and testing market. It is the origin for 20 per cent of US semiconductor imports annually, more than Taiwan, Japan or South Korea. But there hadn\u2019t been much of a catalyst for it to move up the value chain in semiconductors \u2014 until now.<\/p>\n

Demand for ever more high-powered chips in sectors such as electric vehicles and artificial intelligence means so-called advanced packaging \u2014 which connects chips to their circuitboards and protects them from contamination \u2014 is regarded as key to improving performance. A previously labour-intensive process now often takes place in highly automated factories.<\/p>\n

Intel, the world\u2019s largest chipmaker by revenue, is spending $7bn on new facilities in Malaysia, including a \u201c3D\u201d advanced packaging site due to be finished later this year. The cutting-edge technology stacks chips on top of each other to improve performance.<\/p>\n

It is also building another chip assembly and testing factory in Kulim, which borders Penang. \u201cWe have grown from 100 people in assembly, to test, to design [and now] to advanced packaging and to 15,000 people,\u201d says Eric Chan, a Penang-based vice-president at Intel. Malaysia\u2019s existing ecosystem, connectivity and infrastructure for chips was part of the appeal, he says.<\/p>\n

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_____<\/b><\/p>\n

Malaysia led the world in US chip imports last year<\/p>\n

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Micron and Germany\u2019s Infineon are also in expansion mode. US-based Micron last year launched its second facility for assembly and testing in Penang, while Infineon, a subsidiary of German engineering conglomerate Siemens, said it would spend up to $5.4bn to expand over the next five years. It is building the world\u2019s largest production site for the silicon carbide chips widely used by makers of electric vehicles.<\/p>\n

David Lacey, a Penang-based executive for AMS Osram, says supply chain diversification started with the pandemic but \u201cthe geopolitical [backdrop] is causing people to find alternative locations and sources\u201d. The Swiss-based electronics group was one of the first overseas companies to establish a presence in Penang and is still investing there.<\/p>\n

Zafrul Aziz, Malaysia\u2019s minister for investment, trade and industry and chair of the national semiconductor task force launched in February, says he was surprised by how much more productive and automated factories in Penang have become. \u201cI go to [the US] now and the machinery and tools used to manufacture the chips are from Malaysia.\u201d<\/p>\n

There is a flow-on effect to start-ups. Oppstar, one of the few Malaysian companies specialising in integrated circuit design \u2014 the front end of the supply chain \u2014 last year listed on the Kuala Lumpur stock exchange.<\/p>\n

Co-founder Tan Chun Chiat says Malaysia has a \u201cgolden opportunity\u201d to exploit. \u201cFor the next 10-plus years, I think we will see a lot more activity because of inefficiency being created from the [US-China] trade war<\/a>.\u201d<\/p>\n

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_____<\/b><\/p>\n

The investment rush<\/strong> has caught out even Penang\u2019s business-friendly government. Anwar\u2019s visit over lunar new year coincided with yet another ground breaking ceremony on an industrial site to cater to the growing demand.<\/p>\n

Penang\u2019s government owns much of the land in the state, a boon for its coffers. Loo Lee Lian, chief executive of Invest Penang, the non-profit arm of the state government, says the organisation has had to become \u201cmore selective\u201d on who comes in due to the squeeze on land. Development has spilled over into neighbouring states Kedah and Perak.<\/p>\n

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Prices of industrial land have gone from about RM50 per square foot in 2022 to as much as RM85 per square foot, according to Mark Saw, executive director at Knight Frank Penang, a real estate consultancy. Across south-east Asia, Penang\u2019s residential property price growth in the first half of 2023 was second only to the expensive city-state of Singapore, according to Knight Frank.<\/p>\n

Traffic jams have become a regular feature; Micron Malaysia vice-president Ramu Iyer jokes that despite living just 14km from his factory he spends an hour in traffic getting home each day.<\/p>\n

The country\u2019s engineering staff shortage has also become more acute. Zafrul, the trade minister, says the electrical and electronics sector alone requires 50,000 engineers, but only 5,000 engineering students graduate each year \u2014 and many of them slip across the causeway to Singapore, where they are paid much more. Engineering salaries, especially for starting graduates, are still below most other professional sectors in Malaysia and experts say there is a lack of specialised expertise crucial for moving up to the front end of the supply chain.<\/p>\n

Tan Eng Kee, whose Malaysia-listed factory automation equipment specialist Greatech Technology hosted Anwar on his visit to Penang, says the government needs to be \u201cmore focused\u201d on growing local champions and boosting salaries. \u201cIn Taiwan and South Korea, they are proud to work for national companies like TSMC, Pegatron or Samsung,\u201d the chief executive says.<\/p>\n

Historically there has been a lack of political will to offer the targeted incentives needed to lure the biggest semiconductor companies to set up capital-intensive fabrication plants, known as fabs, and Malaysia does not have a national champion in semiconductors like Taiwan\u2019s TSMC.<\/p>\n

Malaysia\u2019s fifth prime minister in five years, Anwar acknowledges a degree of past \u201ccomplacency\u201d when it came to boosting the semiconductor industry after the initial boom in the 1970s and 1980s. But the industry is now a key target of his industrial plan as he focuses on reviving the economy.<\/p>\n

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Anwar says many of the global subsidies are excessive, but has told the trade ministry to look at what other countries are offering to stay competitive. \u201cWe are getting enough investment. I am here [in Penang] to open a new [site],\u201d he adds.<\/p>\n

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_____<\/b><\/p>\n

Much of that is thanks to the rise of new players in Penang: Chinese companies.<\/p>\n

Since the US began imposing trade restrictions on Chinese technology under the Trump administration, and especially since they were tightened by current US President Joe Biden, Penang started to see a flood of interest from mainland groups like Fengshi, according to InvestPenang\u2019s Loo.<\/p>\n

Many of these are companies with global suppliers or western customers hedging against further US restrictions, she says. InvestPenang estimates there are now 55 mainland companies in Penang operating in manufacturing, mostly in semiconductors. That compares to just 16 before the American crackdown began.<\/p>\n

US restrictions do not currently apply to advanced chip packaging services, but Chinese businesses fear potential future curbs, says one Hong Kong-based analyst for a Chinese company, who asked to remain anonymous. Some are de-risking by partnering with Malaysian firms to assemble a portion of their high-end chips, they added.<\/p>\n

Former Huawei unit xFusion is partnering with local operator NationGate to manufacture graphics processing unit servers in Penang. In some cases Chinese and US companies even work together. Packaging and testing company TongFu Microelectronics expanded its Penang facility in partnership with US group AMD in 2022.<\/p>\n

\u201cWhen the country of origin changes to somewhere like Malaysia, I understand from companies that for some products you can also avoid tariffs imposed by the US on China,\u201d adds Seri Wong Siew Hai, president of the Malaysia Semiconductor Industry Association.<\/p>\n

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Intel, the world\u2019s largest chipmaker by revenue, is spending $7bn on new facilities in Malaysia \u00a9 Julia Bellack\/FT<\/em><\/p>\n

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South Korean company Simmtech, which makes the substrates on to which integrated circuits are etched, opened a new advanced manufacturing factory in Penang in 2022 and within months announced it would fast-track the facility\u2019s expansion. Some of its Chinese suppliers have followed it to Penang and set up operations there, says one person familiar with the company\u2019s operations.<\/p>\n

Most Chinese players are still from the assemble-and-test part of the supply chain. But analysts say that if companies in more sensitive and higher-value sectors start to set up shop, that may invite scrutiny.<\/p>\n

Shanghai-based StarFive Technology is a leader in RISC-V (pronounced \u201crisk five\u201d), an open-source technology used in China that competes with the likes of British chip designer Arm. It is building a facility in Penang, but some US lawmakers already want to restrict American companies from collaborating on RISC-V projects.<\/p>\n

The issue will be if the Americans keep broadening their criteria, says MSIA\u2019s Wong \u2014 for instance, by putting products and equipment built in Malaysia on the restricted list. \u201cIf they continue to expand their definitions and sanctions . . . then [Malaysia] may be looking at a different story.\u201d<\/p>\n

Zafrul, the trade minister, agrees there is a \u201cquestion mark\u201d over what else the US could do. \u201cBut further restrictions will probably prove counterproductive, especially considering the significant presence of US companies in Malaysia,\u201d he adds.<\/p>\n

In the meantime Malaysia must focus aggressively on growing high-end investments or \u201close out\u201d to regional rivals, Zafrul adds. Vietnam and India are building their own semiconductor industries, often with much higher state incentives and many more skilled engineers at their disposal.<\/p>\n

His sense of urgency is warranted. Malaysia may have received record investment in recent years, but it still lacks the big prize: a front end fabrication plant. Of around 80 such facilities set to be built worldwide over the next few years, not one is in Malaysia.<\/p>\n

\u201cI am optimistic that we will attract more than one,\u201d Zafrul says. \u201cAll it takes is one to kick-start a wave.\u201d<\/p>\n

Source: Financial Times<\/a>[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][vc_empty_space height=”120px” el_class=”height-x120″][\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

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11<\/h2>\n
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Mon<\/p>\n

March \u201824<\/p>\n<\/p><\/div>\n<\/p><\/div>\n","protected":false},"author":5127,"featured_media":30984,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[316],"tags":[],"news_year":[295],"news_month":[200],"local_insights_alphabet":[],"acf":[],"_links":{"self":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts\/38794"}],"collection":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/users\/5127"}],"replies":[{"embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/comments?post=38794"}],"version-history":[{"count":4,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts\/38794\/revisions"}],"predecessor-version":[{"id":38827,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/posts\/38794\/revisions\/38827"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/media\/30984"}],"wp:attachment":[{"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/media?parent=38794"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/categories?post=38794"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/tags?post=38794"},{"taxonomy":"news_year","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/news_year?post=38794"},{"taxonomy":"news_month","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/news_month?post=38794"},{"taxonomy":"local_insights_alphabet","embeddable":true,"href":"https:\/\/investpenang.gov.my\/zh-hans\/wp-json\/wp\/v2\/local_insights_alphabet?post=38794"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}