Business Today: Malaysia Emerges as Winner in US-China “Chip War,” Semiconductor Export to US Surpasses Japan and South Korea

Malaysia is seeing a surge in investment in its semiconductor industry as it capitalizes on the ongoing US-China “chip war.” Companies like Fengshi Metal Technology, a semiconductor manufacturer based in Tô Châu, China, are opening up in Malaysia, offering higher wages and unique perks such as overseas travel and free meals to attract employees.

This trend is not limited to Chinese companies alone. Other semiconductor giants like Micron and Intel from the United States, as well as European semiconductor companies AMS Osram and Infineon, have also established or expanded their operations in Penang, Malaysia. With a history of 50 years in chip packaging, assembly, and testing, Malaysia is aiming to become a global leader in the semiconductor industry, participating in higher-value activities such as semiconductor wafer fabrication and integrated circuit design.

The US government’s restrictions on Chinese technology, particularly in chip manufacturing, have made Malaysia an attractive destination for investment. Marcel Wismer, CEO of Kemikon, a Malaysian company, stated, “It’s not just Chinese companies [setting up in Penang]. It’s also South Korea, Japan, and the West. And all of this is related to the technology war between the US and China.”

The investment in Malaysia’s semiconductor industry is booming. Penang attracted $12.8 billion in foreign direct investment (FDI) in 2023, surpassing the total amount received from 2013 to 2020.

Surprisingly, Malaysia has emerged as a winner in the US-China technology war due to its expertise in chip assembly, packaging, and testing. The country is the 6th largest exporter of semiconductors globally and holds a 13% market share in chip packaging, assembly, and testing. It is the source of 20% of the US’s annual semiconductor imports, surpassing imports from Taiwan, Japan, and South Korea.

Intel, the world’s largest chip manufacturer by revenue, is investing $7 billion in new facilities in Malaysia, including an advanced “3D” packaging facility set to be completed later this year. They are also constructing another chip assembly and testing factory in Kulim, adjacent to Penang. Eric Chan, Vice President of Intel based in Penang, said, “We started with 100 people doing assembly, testing, design [and now] we have advanced packaging and 15,000 people.” He highlighted that Malaysia’s existing chip ecosystem, connectivity capabilities, and infrastructure contribute to its attractiveness.

Micron and Germany’s Infineon also have expansion plans in Malaysia. Micron, based in the US, opened its second assembly and testing facility in Penang last year, while Infineon, a former subsidiary of Siemens AG, announced a $5.4 billion expansion plan over the next five years. They are building the world’s largest silicon carbide chip production facility, widely used by electric vehicle manufacturers.

The majority of this influx of investment can be attributed to new players in Penang, particularly Chinese companies. Loo Lee Lian, CEO of InvestPenang, stated that since the US began imposing trade restrictions on Chinese technology during the Trump administration, and especially with tighter restrictions under President Joe Biden, Penang has seen a wave of interest from mainland Chinese corporations like Fengshi.

InvestPenang estimates that there are currently 55 mainland Chinese companies operating in Penang, mostly in the semiconductor manufacturing sector. This followed the initial influx of 16 US companies.

Malaysia’s rise as a key player in the global semiconductor industry amid the US-China technology war underscores its capabilities and attractiveness to multinational corporations. As the industry continues to evolve, Malaysia’s strategic position and expertise pave the way for further growth and success.

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