IntroductionWhile speaking at the Semicon Southeast Asia 2024 trade show in Kuala Lumpur (Malaysia),  on May 28, 2024, Malaysian PM Anwar Ibrahim said:"Today, I offe

While speaking at the Semicon Southeast Asia 2024 trade show in Kuala Lumpur (Malaysia),  on May 28, 2024, Malaysian PM Anwar Ibrahim said:

"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."

Malaysia is clearly seeking to give a boost to its semiconductor industry and emerge as a global hub. The ASEAN nation also announced the National Semiconductor Strategy under which over $5 billion (5.33) would be allocated towards the creation of local companies and training of skilled individuals in this area. This investment would include the training over 60,000 low chip engineers in upcoming factories.

Recently, due to the changing geopolitical environment as well as geopolitical factors, several western companies have expanded their operations in Malaysia. The companies include Intel, Infineon and Micron.  Google has recently announced that it would invest $2 billion in Malaysia to develop its first data center and Google Cloud region in the country. Bosch had opened a test center in Penang (Malaysia in August 2023) for final chip testing of automative devices and sensors. This is supposed to be Asia’s most advanced semi-conductor backend sites.

It would be pertinent to point out, that apart from several other advantages, the South-East Asian nation, already an important player in the semi-conductor industry, accounts for 13% of global testing and packaging.

The Malaysian PM said that the strategy seeks not just to draw FDI, but also create world class Malaysian semi-conductor related companies and make Malaysia into a global hub for Research and Development (R and D) in Semi-conductors.

First, while Malaysia, like several other ASEAN nations, has repeatedly expressed its apprehensions regarding the downward slope of US-China ties, the emergence of Malaysia as a favoured destination for Semi-conductor companies highlights the fact that it has benefitted from companies seeking to reduce their dependence upon China (US tech policies vis-à-vis China which have been criticised by ASEAN nations earlier are also benefitting the latter). Apart from the other advantages, which are being to potential investors, the Malaysian PM has also highlighted its geopolitical positioning as one of the major advantages for potential investors.

Second, Malaysia which seeks to draw massive FDI (Foreign Direct Investment) in the tech sector, especially semi-conductor industry, clearly realizes that local man-power needs to be trained. This is important, because several countries with immense potential have failed to attract investments because they lack sufficient manpower. Malaysia’s emphasis on creating a strong R and D eco-system for its semi-conductor industry is also important. The South-East Asian nation has also stated that it is open to foreign talent for giving a boost to its technological aims and objectives. Earlier this year, Malaysia introduced the ‘Golden Pass’ and ‘Innovation Pass’ for attracting venture capitalists and high skilled professionals respectively.

In conclusion, several countries are competing for becoming semiconductor hubs (this is important no longer from a mere economic standpoint, but a security dimension as well). The success of countries will depend upon not just economic factors but geopolitical factors as well. While ASEAN countries have been worried about the Washington-Beijing strains, like Vietnam, Malaysia too is indirectly benefitting from the same (though in the long run tensions between US and China could pose other challenges for the ASEAN region). Countries which follow a reasonably balanced foreign policy and face lesser geopolitical risks (although it is tough to predict the same) like Malaysia are also at an advantage. Finally, while countries are seeking to become more and more insular, the policies of countries like Malaysia clearly show that while the trajectory of globalization may have witnessed changes, it is very much here to stay.

Malaysia's strategy for emerging as a global semiconductor hub: The economic and geopolitical takeaways

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