Did you realize that Malaysia is likely one of the high 10 semiconductor producers on the planet?
According to varied reviews, from ones by Insider Monkey to the federal government, Malaysia is constantly listed within the high 10 semiconductor manufacturing international locations, positioned between the UK and the Netherlands at round quantity seven or eight.
Statista reported that in 2022, roughly 32.64 billion semiconductors have been produced right here.
It’s due to our electrical and electronics (E&E) and semiconductor business that Tesla has arrange store right here.
As reported by Forbes Asia in its 200 Best Under a Billion 2023, demand for semiconductors has skyrocketed up to now three years, accelerated by the adoption of AI applied sciences.
Out of the 9 Malaysian firms on the checklist, three had been within the semiconductors business.
That obtained us pondering, how precisely did Malaysia develop to change into such a longtime hub for semiconductors?
What are semiconductors anyway?
If you paid consideration in science lessons, you’ll keep in mind that semiconductors are supplies which have conductive properties—lower than conductors, however greater than insulators. This makes them helpful in digital units, from smartphones to automobiles.
As defined by The Edge, there are three important teams within the native semiconductor business—companies that do outsourced semiconductor meeting and testing (OSAT), automated check tools (ATE) producers, and designers and producers of high-performance check sockets.
Rarer are precise foundries that manufacture the semiconductor chips themselves. Insider Monkey’s reporting discovered that there are seven operational and deliberate fabs (manufacturing crops that flip uncooked silicon wafers into built-in circuits, or ICs) in Malaysia as of December 2022.
From what we might discover, two of the manufacturing crops belong to Infineon. There are two by Osram Licht—one in Kulim and one in Penang. There’s additionally a plant by ON Semiconductor in Seremban.
In Sarawak, there’s X-Fab, in addition to one other one which’s in progress underneath Sarawak Microelectronic Design Semiconductor and Belgium firm Melexis Technologies.
There’s additionally SilTerra Malaysia, owned by Khazanah Nasional and initiated by then-Prime Minister Tun Dr Mahathir Mohamad in 1995.
The historical past of the semiconductor business in Malaysia
Malaysia’s semiconductor business traces again to the Nineteen Seventies, across the institution of the primary Free Trade Zone in 1972, a Harvard Business School paper said.
The paper additionally defined that free commerce zones in Malaysia, underneath the Free Trade Zone Act, present firms arrange throughout the zone tariff exemptions on imports and exports, tax holidays, tighter controls on labour organisation, and streamlined regulatory processes.
These zones are additionally strategically located alongside well-linked highways and railway techniques and usually have easy accessibility to well-equipped seaports and Kuala Lumpur International Airport.
On high of that, Malaysia was capable of provide decrease labour prices on the time, the paper reported.
According to a 1999 paper by Dr Goh Pek Chen, multinational firms (MNCs) responded nicely to the incentives and cheaper labour, ensuing within the huge relocation of semiconductor companies to Malaysia.
With all this occurring, Intel opened its 5-acre meeting plant in Penang in 1972. This was the very first offshore manufacturing facility.
According to Intel, by 1975, the plant employed a few thousand folks and have become “a crucial part of the company’s manufacturing chain”, however a fireplace in May of that 12 months would consequence within the firm rebuilding a brand new facility the next 12 months.
In 2021, the corporate additionally introduced that it will be investing over US$7 billion to construct a brand new chip-packaging and testing manufacturing facility in Malaysia. The American firm actually has performed a hand in creating our semiconductor business.
Other well-known companies resembling AMD, HP, and Hitachi additionally got here into the nation within the 70s. By the early Nineteen Eighties, there have been fourteen MNC semiconductor companies (excluding subsidiaries) working within the nation, Dr Goh’s paper reported.
Since then, the business has continued to develop regionally, particularly in Penang, which was estimated to contribute to five% of worldwide semiconductor exports in 2019.
The way forward for the business
In latest years, the semiconductor business has been experiencing shortages attributable to a wide range of causes, together with the pandemic, in response to S&P Global. There’s additionally the battle in Ukraine disrupting provide chains, Deloitte identified in its 2023 semiconductor business outlook.
Due to the dearth of provide, there was a growth in demand for semiconductors, however many, together with Forbes, count on a slowing down of the semiconductor business this 12 months.
Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai additionally predicted a slowing down of the business in January 2023.
However, in Deloitte’s report, the agency believes that the downturn within the business might present a possibility for the business to shift its concentrate on a wide range of urgent points.
This contains reaching environmental, social, and governance (ESG) targets, addressing points within the expertise equation (whether or not it’s shortages or layoffs), and looking out into constructing new fabs or increasing present services.
All this apart, Malaysia’s semiconductor business continues to be anticipated to develop with a compound annual progress fee (CAGR) of seven% to achieve an output of US$46 billion or RM212.52 billion by 2028, an Eastspring Investments and PwC Singapore report said.
More than 50 years for the reason that first Free Trade Zone in 1972, semiconductors nonetheless appear to be an electrified business in Malaysia, placing our nation on the worldwide map as an E&E powerhouse and bringing in highly effective traders resembling Tesla.
- Read different articles we’ve written about Malaysia right here.
Featured Image Credit: Intel / Unsplash