Malaysia, Selangor must advance up semiconductor value chain — Economist
19 Apr 2024
Malaysia, and to an extent Selangor, is positioned to be one of the primary beneficiaries of the ongoing trade tension between China and the United States (US), particularly in the multibillion ringgit semiconductor industry.
However, to maximise these gains, the Federal government must focus on leveraging Malaysia’s position to move up the semiconductor value chain, according to an economist.
Prof Emeritus Barjoyai Bardai said the country should move away from conventional semiconductor manufacturing and instead focus on sectors like integrated circuit (IC) design.
He said while current investment towards the semiconductor industry in the country is substantial, it is still at the lower end of the value chain.
“Malaysia is in a prime position to place itself as an IC design base for companies that are based in China, for example,” he told Selangor Journal.
“Due to the ongoing tension between the US and China, Chinese companies cannot import IC design from the US and are now looking towards other options.”
Barjoyai said although Malaysia ought to strive to attract these firms to invest and establish their bases here, the country should focus on being the centre for simple IC design and help establish a much more robust downstream semiconductor ecosystem.
This, he said, will add value to the economy overall.
The semiconductor value chain consists of three main parts, namely upstream (IC design), midstream (IC manufacturing) and downstream (IC packaging and testing).
Under the New Industrial Master Plan (NIMP) 2030, Malaysia hopes to raise the manufacturing sector’s value-added by broadening the scope of products being exported.
The Federal government also hopes NIMP can encourage more front-end activities such as semiconductor equipment manufacturing, wafer fabrication and IC design.
Recently, Malaysia has seen major investments by Intel (RM29.12 billion) and Texas Instruments (RM12.9 billion), among others, to engage in more complex manufacturing activities.
Intel’s expansion will include the construction of an advanced 3D chip packaging facility, its first overseas facility for 3D chip packaging.
Creating, retaining skilled workforce
Barjoyai applauded the approach taken by the Federal government to leverage the ongoing chip war between the US and China and engage with major semiconductor players to invest in the country.
He pointed out that Malaysia already has a mature and trusted track record in the semiconductor business, having begun making major investments into the sector since the 1960s.
However, the major challenge now is creating and retaining enough skilled and semi-skilled workforce to meet industry needs.
“Malaysia has a shortage of skilled workers in terms of engineers to fill critical positions. The same goes to the semi-skilled workforce that is required to fill in these gaps.
“That is why technical and vocational education and training (TVET) programmes are crucial to meet demands.
“Having said that, more needs to be done by the government to expose the younger generation to artificial intelligence and the credible opportunities presented by the internet of things,” he said, adding that such a move would spur greater interest among the youth to pursue a career in these fields.
On the same note, Barjoyai said state governments such as in Selangor and Sarawak, which are competing to be the IC design base for many major semiconductor companies, should consistently conduct their own trade missions and engage with major industry players.
“They must do this continuously and continue to advocate the advantages (of investing in their states) to these companies.
“More importantly, state governments can also strike strategic partnerships with learning institutions in their respective states to produce a skilled workforce that meets the demands of the industry,” he said.
Recently, Selangor embarked on a trade mission to China and Hong Kong in an attempt to draw investors from the semiconductor industry there into the state.
State executive councillor for investment and trade Ng Sze Han had said that the move is part of efforts to create a comprehensive semiconductor ecosystem in Selangor.
He also announced the state’s plan to establish an IC design hub in Selangor, in a concerted effort to expand Malaysia’s semiconductor industry.
Similarly, the state government has pledged to improve the TVET ecosystem to prepare more workers for high-paying jobs.
Menteri Besar Datuk Seri Amirudin Shari had, in March, said there is a great need for skilled workers in sectors like electrical and electronics, biotechnology, aerospace and rail manufacturing.
Among other things, he said the state administration plans to upgrade Universiti Selangor into a technical and vocational university and align Selangor Technical Skills Development Centre programmes with industry demands.
Source: Selangor Journal
