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Artificial Intelligence (AI) represents the cutting edge of computer science, where machines perform tasks that were once exclusive to human intelligence. From learning and reasoning to complex problem-solving, AI systems now match—and in some cases exceed—human capabilities in specific domains. The technology spans from machine learning, where systems evolve through experience, to natural language processing, enabling human-like communication. Today, AI’s impact extends from creative content generation to industrial optimisation, fundamentally reshaping how businesses operate and people live.
The AI market is projected to reach USD243.7 billion in 2025 and surge to nearly USD826.7 billion by 2030 (Statista, 2024). In 2023, the United States led private investment in AI (USD58.1 billion), followed by China (USD6.7 billion). The EU and the United Kingdom (UK) together attracted USD8.3 billion worth of private investment in 2023 (Stanford University, 2024). This remarkable growth reflects AI’s increasing importance – not just as a tool for efficiency, but as a driver of innovation, economic development and competitiveness.
As Malaysia stands at the cusp of technological transformation, mastering AI’s dual nature—both as a disruptive force and a growth catalyst—is essential for sustainable development. This understanding will shape the nation’s competitive advantage in the digital age.
The widespread adoption of AI technologies triggers fundamental shifts across economic and social landscapes, demanding strategic responses from governments, industries, and workforce sectors.
AI automates tasks previously performed by humans, particularly in areas like content creation, customer service and design. AI-powered tools are already generating articles, producing marketing visuals and optimising engineering designs which raises concerns about job displacement across various sectors. To remain competitive, Malaysia has no choice but to prioritise reskilling and upskilling initiatives, preparing talent for roles that require human creativity, critical thinking, and complex problem-solving—skills that AI cannot easily replicate.
AI’s ability to generate realistic synthetic media, such as deepfakes (‘deep learning’ and ‘fake’) presents significant ethical challenges. Deepfakes, which are manipulated videos or images, can be used to spread misinformation, manipulate public opinion, and even blackmail individuals, which erodes public trust. This underscores strong regulatory frameworks to guide the responsible development and application of AI technologies in Malaysia.
AI can produce content that closely resembles existing works, raising questions about intellectual property rights and ownership. Creators may find their work being replicated or transformed by AI without proper attribution or compensation, leading to potential legal disputes. We may see machinery and equipment designs being astoundingly duplicated, mimicking the style of the real machine, which could lead to debates about ownership, patents and the rights of the real designers.
AI can augment human creativity across sectors, from manufacturing to creative industries. It can accelerate product development, personalise consumer experiences, and inspire new design concepts. By integrating AI into industrial processes, businesses can push the boundaries of innovation, enhancing productivity and global competitiveness.
As in industrial AI, it can streamline processes, improve efficiency, and reduce costs across various industries. It can optimise production lines by reducing labour costs, minimising errors, increasing production speed, reducing waste and improving product quality. This can be achieved by introducing specific criteria and constraints. Research and Development (R&D) can now be more effective through powerful algorithms and natural language processing (NLP) tools by simulating complex processes and predicting the outcomes based on the hypothesis and research direction obtained from existing data and research.
AI-powered education platforms offer personalised learning experiences, enabling real-time feedback and adaptive training programmes. These capabilities can enhance workforce development, making skills training more accessible and effective, particularly in high-tech and complex industrial environments.
AI deployment needs a special architecture as the enabler. Due to its deep learning function, it requires high-performance processes like graphic processing units (GPUs) that are compatible with its software frameworks. Looking at its ecosystem, this is one of the many essential components to enable AI, presenting a significant opportunity for Malaysia to grab. New investment pertaining to AI could build a stronger ecosystem and offer significant spillover to the economy including strengthening vendor capability, enhancing talent readiness, better infrastructure and higher salary workforce.
Malaysia has taken notable steps to embrace AI as part of its national development agenda. Ranked 29th out of 181 countries in the Oxford Insights Government AI Readiness Index 2022, Malaysia is leveraging its digital capacity, infrastructure, and industrial ecosystem to move forward. To achieve a higher position, the Government of Malaysia together with various stakeholders including industries and academia has worked through various initiatives to achieve the goal of being the hub for AI in the region.
To name a few initiatives, in the New Industrial Master Plan (NIMP) 2030 launched on 1 September 2023, the Government has set out the initiative to embrace AI through Mission 2 of Action Plan 3.2 which is to develop generative and industrial AI solution leaders and system integrators. Mission 1 is also focused on several important sectors such as IC design, wafer fabrication, specialty chemicals and advanced materials that support the development of AI in Malaysia.
The masterplan was further enhanced by the formation of the National Semiconductor Strategy (NSS) announced in May 2024 which also supports IC design, advanced packaging, machinery & equipment and its ecosystem. NSS sets out various strategies including talent readiness, supply chain, R&D, industrial parks and incentive packages in accepting high-tech investment in the semiconductor industry, which indirectly covers AI development in Malaysia.
While both initiatives focus on the manufacturing sector, the latest effort by MyDigital under the National AI Office marks a significant step forward with the launch of the National AI Blueprint on December 12, 2024. This blueprint underscores Malaysia’s commitment to becoming a regional AI hub by developing the entire AI value chain—from manufacturing AI-related components and equipment to integrating AI into consumer experiences.
To support this initiative, several funding programmes have been introduced, including:
Beyond these efforts, Malaysia has long supported AI-related projects through special tax incentives and double tax deductions for AI-focused research and development (R&D).
Apart from these initiatives, Malaysia has also been long promoting AI related projects by providing special tax incentives and double tax deductions for AI-related research & development (R&D).
These strategies are built upon Malaysia’s strong foundation as the sixth-largest exporter of semiconductors, contributing 13% of the global market in semiconductor packaging, assembly, and testing.
AI brings both disruptions and immense opportunities. For Malaysia, the challenge lies in balancing these forces—managing risks while seizing growth prospects. With strategic planning, targeted investment, and continuous talent development, Malaysia is on the path to harnessing AI as a driver of economic growth, technological leadership, and global competitiveness.
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