Malaysia is increasingly attracting semiconductor factories amid escalating tensions between the US and China, which have prompted companies to seek diversification in their operations. 

Malaysia Emerges as a Chipmaking Hub Amid US-China Chip Tensions

According to CNBC, Kenddrick Chan, head of the digital international relations project at the foreign policy think-tank LSE IDEAS of the London School of Economics and Political Science, said Malaysia has a well-established infrastructure and extensive experience in semiconductor manufacturing processes, particularly in assembly, testing, and packaging.

Semiconductors, which are essential components in various products such as smartphones and cars, have been at the center of a US-China technology conflict.

US chip giant Intel announced plans in December 2021 to invest over $7 billion in constructing a chip packaging and testing factory in Malaysia, slated to commence production this year. 

Aik Kean Chong, managing director of Intel Malaysia, told CNBC that the country's diverse talent pool, robust infrastructure, and reliable supply chain are the key factors that influence the company's decision.

Intel's venture in Malaysia dates back to 1972, when it established its first overseas production facility in Penang with a $1.6 million investment. It gradually expanded to include a full test facility and a development and design center.

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Global Market Share of Malaysia

Another US chip giant, GlobalFoundries, also inaugurated a hub in Penang in September to bolster its global manufacturing operations alongside existing US, Europe, and Singapore plants.

Last month, Neways, a key supplier to Dutch chip equipment maker ASML, announced plans to build a new production facility in Klang. In 2022, Germany's top chipmaker, Infineon, said it would establish a third wafer fabrication module in Kulim.

According to the February 18 report of the Malaysian Investment Development Authority, Malaysia accounts for 13% of the global market share in chip packaging, assembly, and testing services. 

Despite a slight uptick in exports of semiconductor devices and integrated circuits to 387.45 billion Malaysian ringgit ($81.4 billion) in 2023, amid subdued global chip demand, Malaysia continues to position itself as a key player in the semiconductor industry. 

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