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The Sun
6 days ago
- Business
- The Sun
Malaysia urged to bolster semiconductor ecosystem to shield itself from potential demand shocks
PETALING JAYA: With the United States still investigating whether to impose tariffs on semiconductors under Section 232 of the Trade Expansion Act of 1962, Malaysia is urged to bolster its semiconductor ecosystem to shield itself from any potential demand shocks. Although no tariffs have been formally introduced, the Malaysia Semiconductor Industry Association (MSIA) warned that downstream repercussions from such a move could ripple through local supply chains, particularly in manufacturing-intensive segments. 'If US tariffs are imposed arising from the investigation, manufacturing-intensive semiconductor segments will likely face the most immediate pressure,' MSIA executive director Andrew Chan Yik Hong told SunBiz in a written response. Chan stressed that Malaysia must consider proactive policy buffers to maintain its global competitiveness if geopolitical tensions escalate. 'Malaysia must continue to engage constructively with U.S. trade counterparts to ensure we remain a trusted, neutral and strategic partner in the global chip ecosystem,' he said. 'But more importantly, we must double down on what we can control.' Despite growing geopolitical headwinds, Malaysia's electrical and electronics (E&E) sector, of which semiconductors are a major component, remains robust. From January to May 2025, E&E exports surged by 20% year-on-year, far outperforming the country's total export growth of 5.5% during the same period. 'This underscores the resilience and competitiveness of our semiconductor ecosystem,' Chan noted. However, he cautioned that the sector's exposure to global demand fluctuations remains a critical vulnerability. A major shift in US trade policy could trigger ripple effects across Malaysia's electronics manufacturing, testing and packaging industries, key pillars of its export economy. 'Semiconductors are the building blocks of modern life. A slowdown in global demand, whether due to tariffs or macroeconomic uncertainty, would inevitably affect Malaysia's semiconductor output,' Chan said. He outlined three major contingency areas that Malaysia must invest in to insulate itself from future shocks and position itself as a long-term chip powerhouse – talent development, ecosystem resilience and supply chain agility. 'We must develop world-class engineers, operators and innovators through deep industry-academic collaboration and remain the most attractive hub for semiconductor design, manufacturing and advanced packaging in the region. 'Malaysia must also expand and diversify upstream and downstream capabilities to absorb global shocks more effectively,' Chan said. Malaysia currently plays a key role in the back-end and increasingly mid-stream segments of the global chip supply chain. While the nation lacks front-end fabrication capacity at scale, its strong foothold in testing, assembly and advanced packaging positions it as a critical node in the Asia-Pacific semiconductor landscape. Chan pointed to the RM319 billion in approved E&E investments between 2021 and 2024 as a sign that Malaysia is at a strategic sweet spot. 'We must capitalise on this with the right policies, long-term vision and execution,' he said. 'Malaysia can emerge stronger, not just weathering global shifts, but positioning itself as a semiconductor powerhouse for the next decade.' While US tariff decisions remain pending, Chan's message is clear: Malaysia must prepare now, not react later. 'The global semiconductor race is no longer just about who can produce the most chips. It's about who can adapt fastest and Malaysia has what it takes to lead, if we stay focused,' he said. The US launched a Section 232 investigation in April to assess whether semiconductor imports pose a national security threat, potentially paving the way for tariffs. While no tariffs are in place yet, the move signals rising protectionism amid geopolitical tensions. Malaysia, which holds 13% of the global chip packaging and testing market, could face ripple effects if global demand shifts. As a key player in the back-end and midstream supply chain, Malaysia has seen over RM319 billion in E&E investments since 2021. The country is positioning itself as a resilient, strategic semiconductor hub in the face of global trade realignments.
The Star
22-06-2025
- Business
- The Star
E&E growth spurs call for stronger R&D
KUALA LUMPUR: Malaysia has enjoyed strong investment growth in the electrical and electronics (E&E) sector over the past four years, but more needs to be done to strengthen its research and development (R&D) capabilities – particularly in product innovation – to move up the value chain. Malaysia Semiconductor Industry Association (MSIA) executive director Andrew Chan Yik Hong said Malaysia continues to be the preferred investment destination for the E&E sector. 'The proof is in the pudding. Approved investments for the E&E sector in Malaysia from 2021 to 2024 total RM319bil. 'This is more than the investments secured in the past 41 years, from 1980 to 2020, of RM289bil,' he said during a panel discussion titled 'From Production Hub to Innovation Powerhouse: Strengthening Malaysia's E&E Industry' at Bank Negara's Sasana Symposium 2025 yesterday. STMicroelectronics Malaysia group vice- president and general manager Tan Chun Sheng described R&D as the 'crown jewel' of the semiconductor business and stressed the need for a change in the types of incentives offered, moving away from merely tax incentives. He believes the government should redirect support toward firms' R&D efforts in the form of grants and wage supplements. 'We are very good at manufacturing-related R&D. However, let us move up the value chain in terms of R&D, because that is what makes the country an attractive and vital part of the supply chain,' he said. Tan suggested the government consider taxing multinational corporations and ploughing back the revenue into R&D grants and incentives. 'We have always talked about the need for higher wages in the the government needs to do is declare that anyone involved in science, technology, engineering, and mathematics or R&D will receive wage supplements. Instantly, the wages will go up. 'But where will the money come from for this? Taxation,' he added. Citing South Korea, Kolon Industries senior technology adviser Sung Han said the government there offers significant tax incentives to firms across various industrial sectors based on their R&D investments. 'I think this is critically important because it incentivises talent development and drives the innovation that must happen within the R&D space, rather than just on the manufacturing floor,' he said. He also highlighted the strong public-private partnerships in Korea, where much of the R&D is government-funded, creating an environment that continuously fuels innovation across industries like semiconductors and automotive. 'What South Korean companies like Samsung Electronics Co Ltd and SK Hynix Inc have done to move up the value chain is not just developing semiconductor-related materials needed for production – because companies can't decouple material characteristics from IC (integrated circuit) design – but they have also built up local suppliers for materials and production tools. 'Today, for a few critical tools in leading-edge nodes, local Korean companies can supply many of those tools and materials. This creates the infrastructure necessary for the sector to become independent in developing and conducting its own R&D on new next-generation products. 'I think this is what Malaysia may be missing today,' Sung Han added. That said, Tan opined that Malaysia's semiconductor sector does not necessarily have to rely solely on financial incentives such as subsidies or grants from the government to attract investment. In fact, the country already holds several key advantages, chief among them being experience. 'The most important advantage that we have as a country is experience, given that the semiconductor industry has been here for more than 50 years.' He said the second advantage that Malaysia has is talent. 'Our engineers are very talented, with strong technical skills.' When asked why Malaysia has not been successful in attracting leading foundry companies, MSIA's Chan said much of the recent investment surge occurred before the National Semiconductor Strategy (NSS) was introduced. 'I believe that the Malaysian Investment Development Authority had received enquiries on this back then, but somehow the equation did not stack up. 'However, I am optimistic that if we continue to double down on the NSS – the upcycle for semiconductor fabrication plants (fabs) is not now, it is in a couple of years – we will see more fabs, hopefully, in Malaysia,' he said.
