Malaysia unveils 3-phase US$5.3bil National Semiconductor Strategy to strengthen position in all-out global semicon war

• 3-phase plan backed by US$5.3bil in fiscal support and targeted incentives
• Move up into higher-end manufacturing, design, packaging, and equipment

In an ambitious move, the Malaysian government today unveiled its National Semiconductor Strategy (NSS), a sweeping three-phase plan backed by US$5.3 billion (RM25 billion) in fiscal support and targeted incentives, designed to transform the country into a global powerhouse in the semiconductor industry over the next decade. 

Unveiling the initiative at the SEMICON SEA 2024 conference in Kuala Lumpur today, Prime Minister Anwar Ibrahim declared Malaysia's intention to cement its position as a leading international hub for semiconductor manufacturing, and innovation while aiming to build a strong base in chip design.

Anwar’s announcement follows that made by South Korea's president last week, Yoon Suk Yeol, who, in describing how there was an “all-out war” in the global semiconductor market to seize the fruits of what is predicted to be a US$1 trillion market by 2030, announced a US$19 billion (RM89.2 billion) support package with 70% focused on helping homegrown SMEs in the semiconductor supply and value chain. And to reinforce his use of the war analogy, China yesterday, launched its third fund to support the semiconductor sector as it battles the United States for chip leadership with a US$47.5 billion fund.

[Ed: Para updated for accuracy.]

Anwar underscored the vital importance of a resilient and diversified global semiconductor supply chain while acknowledging Malaysia's strong foundations as the 6th largest semiconductor exporter and 10th for electrical and electronics products. 

Highlighting its outsourced semiconductor assembly and test (OSAT) specialization, Anwar also spelled out Malaysia's intentions to move up the value chain into higher-end manufacturing, design, packaging, and equipment.

"The NSS is a robust, agile, inclusive, and forward-thinking strategy designed to foster collaboration with companies across ASEAN, Asia, and the global stage," Anwar proclaimed. "Geopolitical dynamics aside, a robust multinational semiconductor production remains vital for humankind, particularly as we are running out of time in our climate action and risk mitigation efforts."

Reflecting Malaysia's increasing strategic position, Penang, Asia’s Silicon Island, attracted a record RM61 billion  in semiconductor FDI last year - exceeding its combined FDI of the previous seven years. This includes Intel's RM30 billion investment in a new fabrication facility.

[RM1 = US$0.212]

"While proud of our OSAT achievements, we have strong capacity to diversify higher into the value chain," Anwar affirmed, outlining the NSS's vision to cultivate an ecosystem driven by dynamic Malaysian firms and world-class talent collaborating with global industry leaders.

Formulated through a collaborative effort between the Ministry of International Trade and Industry (MITI), its agencies, and various other ministries, the ambitious NSS has been structured into a three-phase plan. Phase 1 focuses on "Building on Our Foundations" by leveraging Malaysia's existing industry capacity and capabilities. 

This includes modernizing OSAT services with advanced packaging, expanding trailing-edge chip fabrication and power chip production, and developing local chip design champions.Phase 2, dubbed "Moving to the Frontier," will pursue cutting-edge logic and memory chip design, fabrication, testing, and integration with major chip buyers. 

Anwar expressed confidence that successful implementation of Phase 1 will attract leading advanced chip manufacturers to establish operations in Malaysia. The third and final phase, "Innovating at the Frontier," aims to develop world-class Malaysian semiconductor design, advanced packaging, and manufacturing equipment firms while attracting cutting-edge technology giants like Apple, Huawei, and Lenovo to pursue advanced manufacturing in the country.

Underpinning the NSS are five overarching targets that the Malaysian government has set:

1. Secure at least RM500 billion in investments for Phase 1, driven by domestic direct investments in IC design, advanced packaging, and manufacturing equipment, coupled with foreign direct investments in wafer fabs and semiconductor equipment.

2. Establish at least 10 Malaysian companies in the design and advanced packaging segments, each with revenues ranging from RM1 billion to RM4.7 billion by Phase 2. A further 100 semiconductor-related local companies with revenues approaching RM1 billion are envisioned.

3. Position Malaysia as a globally-recognized R&D hub for semiconductors, bolstered by world-class universities, corporate research centers, and centers of excellence that blend top Malaysian and international talent.

4. Train and upskill a highly-skilled semiconductor workforce comprising 60,000 Malaysian engineers in the next five to ten years.

5. Allocate no less than RM25 billion in fiscal support and targeted incentives to ensure successful operationalization of the NSS.

Overall, the NSS is spearheaded by the National Semiconductor Strategic Task Force (NSSTF) under MITI's oversight, with CREST serving as the strategy's secretariat. Anwar stressed that the NSS will remain a "living document" that evolves dynamically in response to changing industry and market conditions while preserving Malaysia's core aspiration - to emerge as "a major global player in accessible technology for all, powered by our semiconductor industry."

Underpinning the national strategy is Malaysia's positioning as a neutral, non-aligned territory that can anchor a distributed and diversified semiconductor supply chain to mitigate geopolitical risks and vulnerabilities. Anwar emphasized that Malaysia stands ready to welcome partnerships and investments from all corners of the world to collectively advance this vital industry.

"Today, I offer our nation as the most neutral and non-aligned location for semiconductor production, to help build a more secure and resilient global semiconductor supply chain," he declared, calling for support from industry stakeholders within Malaysia and internationally.