Malaysia to expand advanced packaging, chip manufacturing
25 Feb 2025
Investments in these segments require patience, often taking between 5 and 10 years to yield returns
The country has the potential to expand its role in advanced packaging and semiconductor manufacturing, backed by its infrastructure and skilled workforce.
As geopolitical shifts and supply chain diversification drive semiconductor companies to explore new locations, Malaysia is positioning to capture a greater share of the market. However, investments in these technologies require patience, often taking between five and 10 years to yield returns, according to a sector report on technology released by RHB Investment Bank Bhd on Feb 18.
The report highlighted a recent event organised by the investment bank, featuring industry veteran and EQUVO Consulting Partners CEO Melvin Low. Low holds multiple board and advisory positions with companies in Singapore, Malaysia, Taiwan, Korea, and the US.
It noted that Malaysia is home to companies such as Dagang NeXchange Bhd, which took control of SilTerra Malaysia Sdn Bhd, and the global foundry group X-FAB, which provides specialty technologies and design intellectual property to enable its customers to develop semiconductor products.
“This expertise is complemented by strong proficiency in English and bilingual capabilities in Chinese, facilitating communication in global operations.
“Additionally, Malaysia’s growing role in advanced packaging is further reinforced by the diversification of supply chains amid the US-China trade war, positioning the country as an increasingly attractive destination for semiconductor investment and high-tech manufacturing,” the report added.
“Successfully establishing and growing semiconductor fabs requires several key resources and government support mechanisms. First, a strong base of engineering talent is crucial to sustain advanced manufacturing to achieve good yield and research and development (R&D) efforts.
“Government policies, such as subsidies and taxes, further enhance investment appeal by lowering operational costs. Third, reliable and competitively priced utilities, such as electricity and water, are necessary to support high-energy-consuming fabrication processes,” it added.
The report said Malaysia has emerged as an attractive destination for the semiconductor industry, especially the back-end process, benefitting from a skilled workforce in semiconductor packaging, electronics manufacturing services and some wafer fabrication.
Making the case for Malaysia, the report noted that the country plays a critical role in the global semiconductor supply chain, particularly in the outsourced semiconductor assembly and testing (OSAT) segment.
It is home to leading OSAT players such as Inari Amertron Bhd, Malaysian Pacific Industries Bhd (MPI), Unisem (M) Bhd and Globetronics Technolog y Bhd — which provide essential back-end services — including packaging, testing and assembly for major global semiconductor companies.
Additionally, Malaysia’s strategic location in South-East Asia and its well-developed free trade zones (FTZs) facilitates the seamless import and export of semiconductor components and finished products.
With strong government support, including tax incentives and grants under initiatives such as the New Industrial Master Plan (NIMP 2030) and the National Semiconductor Strategy (NSS), the country continues to attract new semiconductor investments.
The report said one of Malaysia’s key strengths lies in its cost competitiveness. Competitive wages for operators and technicians, along with low costs for power and water, make it an economically viable hub for semiconductor manufacturing.
Furthermore, the country’s well-developed logistics infrastructure — including road, rail, air and sea freight networks — ensures efficient supply chain management and global connectivity.
Malaysia’s appeal extends beyond its industrial capabilities. It offers a high quality of life, with affordable and excellent living conditions that attract expatriates. International schools, a comfortable environment for families and proximity to Singapore further enhance its liveability and strategic positioning. This connectivity with Singapore, a global semiconductor hub, provides additional opportunities for collaboration and talent mobility.
Moreover, the nation has the potential to attract experienced semiconductor professionals currently working in key markets such as Singapore, Taiwan, China, and the US. By leveraging its diaspora of skilled talent, Malaysia can further strengthen its talent pool and industry capabilities, positioning itself as a leading player in the global semiconductor landscape. These factors make the country a promising and well-rounded choice for semiconductor investment and growth.
Source: The Malaysian Reserve
