How Malaysia fostered a semiconductors trade that introduced in buyers like Tesla & Intel | Digital Noch

How Malaysia fostered a semiconductors trade that introduced in buyers like Tesla & Intel | Digital Noch

Do you know that Malaysia is among the prime 10 semiconductor producers on this planet?

In keeping with varied experiences, from ones by Insider Monkey to the federal government, Malaysia is persistently listed within the prime 10 semiconductor manufacturing nations, positioned between the UK and the Netherlands at round quantity seven or eight.

Statista reported that in 2022, roughly 32.64 billion semiconductors have been produced right here.

It’s due to our electrical and electronics (E&E) and semiconductor trade that Tesla has arrange store right here.

As reported by Forbes Asia in its 200 Greatest Underneath a Billion 2023, demand for semiconductors has skyrocketed up to now three years, accelerated by the adoption of AI applied sciences.

Out of the 9 Malaysian firms on the record, three had been within the semiconductors trade.

That received us considering, how precisely did Malaysia develop to turn into such a longtime hub for semiconductors?

What are semiconductors anyway?

If you happen to paid consideration in science lessons, you’ll keep in mind that semiconductors are supplies which have conductive properties—lower than conductors, however greater than insulators. This makes them helpful in digital units, from smartphones to automobiles.

Picture Credit score: Pexels

As defined by The Edge, there are three most important teams within the native semiconductor trade—companies that do outsourced semiconductor meeting and testing (OSAT), automated check tools (ATE) producers, and designers and producers of high-performance check sockets.

Rarer are precise foundries that manufacture the semiconductor chips themselves. Insider Monkey’s reporting discovered that there are seven operational and deliberate fabs (manufacturing vegetation that flip uncooked silicon wafers into built-in circuits, or ICs) in Malaysia as of December 2022.

From what we might discover, two of the manufacturing vegetation belong to Infineon. There are two by Osram Licht—one in Kulim and one in Penang. There’s additionally a plant by ON Semiconductor in Seremban.

In Sarawak, there’s X-Fab, in addition to one other one which’s in progress beneath Sarawak Microelectronic Design Semiconductor and Belgium firm Melexis Applied sciences.

How Malaysia fostered a semiconductors trade that introduced in buyers like Tesla & Intel | Digital Noch Digital Noch
Infineon’s workplace in Melaka / Picture Credit score: Infineon

There’s additionally SilTerra Malaysia, owned by Khazanah Nasional and initiated by then-Prime Minister Tun Dr Mahathir Mohamad in 1995.

The historical past of the semiconductor trade in Malaysia

Malaysia’s semiconductor trade traces again to the Seventies, across the institution of the primary Free Commerce Zone in 1972, a Harvard Enterprise Faculty paper said.

The paper additionally defined that free commerce zones in Malaysia, beneath the Free Commerce Zone Act, present firms arrange throughout the zone tariff exemptions on imports and exports, tax holidays, tighter controls on labour organisation, and streamlined regulatory processes.

How Malaysia fostered a semiconductors trade that introduced in buyers like Tesla & Intel | Digital Noch Digital Noch
Intel representatives assembly with Dr. Lim of the Penang Improvement Corp. in 1972 / Picture Credit score: Intel

These zones are additionally strategically located alongside well-linked highways and railway techniques and sometimes have easy accessibility to well-equipped seaports and Kuala Lumpur Worldwide Airport.

On prime of that, Malaysia was capable of provide decrease labour prices on the time, the paper reported.

In keeping with a 1999 paper by Dr Goh Pek Chen, multinational companies (MNCs) responded effectively to the incentives and cheaper labour, ensuing within the huge relocation of semiconductor companies to Malaysia.

With all this occurring, Intel opened its 5-acre meeting plant in Penang in 1972. This was the very first offshore manufacturing facility.

How Malaysia fostered a semiconductors trade that introduced in buyers like Tesla & Intel | Digital Noch Digital Noch
Picture credit score: Intel

In keeping with Intel, by 1975, the plant employed a few thousand folks and have become “a vital a part of the corporate’s manufacturing chain”, however a hearth in Could of that 12 months would consequence within the firm rebuilding a brand new facility the next 12 months.

In 2021, the corporate additionally introduced that it could be investing over US$7 billion to construct a brand new chip-packaging and testing manufacturing facility in Malaysia. The American firm actually has performed a hand in growing our semiconductor trade.

How Malaysia fostered a semiconductors trade that introduced in buyers like Tesla & Intel | Digital Noch Digital Noch
Intel’s native places of work / Picture Credit score: Intel

Different well-known companies reminiscent of AMD, HP, and Hitachi additionally got here into the nation within the 70s. By the early Eighties, there have been fourteen MNC semiconductor companies (excluding subsidiaries) working within the nation, Dr Goh’s paper reported.   

Since then, the trade has continued to develop domestically, particularly in Penang, which was estimated to contribute to five% of worldwide semiconductor exports in 2019.

The way forward for the trade

In recent times, the semiconductor trade has been experiencing shortages attributable to quite a lot of causes, together with the pandemic, in response to S&P International. There’s additionally the battle in Ukraine disrupting provide chains, Deloitte identified in its 2023 semiconductor trade outlook.

Because of the lack of provide, there was a growth in demand for semiconductors, however many, together with Forbes, anticipate a slowing down of the semiconductor trade this 12 months.

Malaysia Semiconductor Business Affiliation (MSIA) president Datuk Seri Wong Siew Hai additionally predicted a slowing down of the trade in January 2023.

Nonetheless, in Deloitte’s report, the agency believes that the downturn within the trade might present a possibility for the trade to shift its give attention to quite a lot of urgent points.

This contains reaching environmental, social, and governance (ESG) objectives, addressing points within the expertise equation (whether or not it’s shortages or layoffs), and looking out into constructing new fabs or increasing current services.

How Malaysia fostered a semiconductors trade that introduced in buyers like Tesla & Intel | Digital Noch Digital Noch
An excerpt from Eastspring Investments and PwC Singapore’s report

All this apart, Malaysia’s semiconductor trade continues to be anticipated to develop with a compound annual development fee (CAGR) of seven% to achieve an output of US$46 billion or RM212.52 billion by 2028, an Eastspring Investments and PwC Singapore report said.

Greater than 50 years because the first Free Commerce Zone in 1972, semiconductors nonetheless appear to be an electrified trade in Malaysia, placing our nation on the worldwide map as an E&E powerhouse and bringing in highly effective buyers reminiscent of Tesla.

  • Learn different articles we’ve written about Malaysia right here.

Featured Picture Credit score: Intel / Unsplash

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