The Attractiveness of Vietnam’s Semiconductor Industry Competition
Malaysia has regained its glory from the previous century. The country has established a fully-fledged chip production ecosystem. In 1972, the muddy rice fields in Penang became Intel’s first manufacturing base outside of the United States. The allure of the new free trade zone and the bustling shipping port in the Malacca Strait attracted investments from Intel, along with AMD, Renesas (formerly Hitachi), Keysight Technologies (formerly Hewlett-Packard), and other multinational technology conglomerates, turning the region into the “Silicon Valley of the East.” Over the years, Intel alone has invested more than $5 billion in Malaysia. Together, these chip companies have transformed Malaysia into a semiconductor hub, contributing 23% to the US semiconductor market by 2022.
Malaysia’s highly developed semiconductor ecosystem has made it a top destination. In 2022, Advanced Semiconductor Engineering, the world’s largest APT company, started constructing a new semiconductor assembly facility in Penang. In the same city, Intel initiated the construction of the first advanced 3D chip packaging plant outside of the US, while Bosch opened one of the most advanced testing facilities in Asia last August. Two months later, Micron inaugurated its advanced assembly plant in the country and announced an additional $1 billion investment in the coming years. The strong investment in chips has been so significant that DHL Express is building new logistics centers around Penang.
Currently, Malaysia accounts for 13% of the world’s APT services (including assembly, packaging, and testing). Malaysia can leverage its growing strength in the back-end phase of the chip supply chain to attract front-end manufacturing investments. With a well-established APT cluster, Malaysia can significantly boost chip manufacturers’ confidence in the supply chain’s recovery capability.
The semiconductor sector in Malaysia is expected to experience rapid growth starting from the second half of 2024 as the global economy accelerates its recovery process, according to a report from the Malaysia Semiconductor Industry Association (MSIA). MSIA Chairman Datuk Seri Wong Siew Hai stated that global semiconductor sales declined by 8.2% to $527 billion in 2023, but Malaysia’s market maintained positive growth throughout the year.
However, Malaysia still faces several challenges, primarily in terms of its labor force. The shortage of technical professionals in Malaysia is quite severe, leading to local chip manufacturers having to reject potential customers. According to SCMP, Malaysia is facing a shortage of approximately 1.2 million workers.
Zafrul, the Minister of Trade, emphasized the need for strong investment growth to prevent Malaysia from falling behind regional competitors. Vietnam and India are building their semiconductor industries, enjoying numerous government incentives and having a larger pool of skilled engineers.
Additionally, Malaysian parliament member Liew Chin Tong also pointed out that the country has sufficient talent, but low wages hinder its competitiveness. The average salary for engineers, especially fresh graduates, is still lower compared to most other specialized fields in Malaysia. Specifically, the average salary for engineers and technicians in the manufacturing sector in Malaysia was $460 in 2021, compared to $1,500 in Singapore. This wage disparity has caused a continuous brain drain from Malaysia.
Furthermore, low wages continue to discourage Malaysian students from pursuing STEM education in fields such as science, technology, engineering, and mathematics. For instance, Malaysia’s engineer-to-population ratio stood at 1 in 170 by the end of 2022, while the average ratio in developed countries is approximately 1 in 100.
Several measures have been proposed to address this situation. At the national level, the Malaysian government has funded the GBS Penang Industrial Academy to enhance collaboration between universities and businesses in expanding the country’s technical talent pool. The overall plan for the new industry by 2030 sets the goal of doubling the average salary in the manufacturing sector by 2030.
On the international front, Malaysia and the United States have agreed to enhance the supply chain’s recovery capability through joint technical support and capacity building.
In conclusion, Malaysia’s semiconductor industry has regained its allure as a prominent competitor to Vietnam. The country’s well-established ecosystem and strategic investments have made it a top destination for chip manufacturers. However, Malaysia must address its labor shortages and wage disparities to remain competitive against regional rivals. With appropriate measures and collaboration, Malaysia can continue to attract investments and strengthen its position in the semiconductor industry.
Visit Business Today for more financial news and insights.