Malaysia’s chip ambitions: From assembly hub to semiconductor powerhouse

KUALA LUMPUR, Sept 4 — Semiconductors are behind much of the technology people use every day, from smartphones and cars to bank cards, air-conditioners and the data centres powering artificial intelligence (AI).

Malaysia has been part of the global semiconductor industry for more than five decades and is now looking to move beyond its traditional strengths.

The country is particularly strong in the back end of the semiconductor supply chain — assembly, packaging and testing — but is seeking a bigger role in higher-value activities such as chip design, advanced packaging, semiconductor equipment and research and development.

So where does Malaysia stand today, and how is it trying to move up the value chain?

First, what exactly is a semiconductor?

A semiconductor is a material that can be used to control the flow of electricity.

Silicon is the most widely used semiconductor material.

Tiny electronic devices known as integrated circuits (ICs) — or simply “chips” — are built on pieces of semiconductor material.

These chips contain interconnected electronic components, including microscopic transistors that process electrical signals.

Different chips perform different functions.

Central processing units (CPUs) handle general computing in computers and servers, while graphics processing units (GPUs) perform large numbers of calculations simultaneously and are increasingly important for AI and data centres.

Memory chips store information in smartphones, computers and other devices, while microcontrollers control functions in products such as cars, washing machines and air-conditioners.

In other words, semiconductors are building blocks of the modern digital economy.

Smartphones use chips for processing, cameras and communications; cars use them for batteries, sensors and braking systems; while bank cards use them for secure transactions.

Where is Malaysia now?

Malaysia’s semiconductor industry began developing in the 1970s and has since grown into a large ecosystem involving multinational companies, local suppliers, engineers and technicians.

The country is particularly strong in the back end of the semiconductor supply chain — assembly, packaging and testing.

The Malaysian Investment Development Authority (Mida) estimates Malaysia accounts for about 13 per cent of global back-end semiconductor assembly, testing and packaging and about 7 per cent of global semiconductor trade.

In 2024, exports of semiconductor devices, integrated circuits, transistors and valves amounted to RM387.98 billion, accounting for 64.5 per cent of Malaysia’s RM601.21 billion in E&E exports, according to the Malaysia External Trade Development Corporation (Matrade).

Investment data also shows continued interest in the broader semiconductor ecosystem.

According to Mida, Malaysia’s electronic components subsector recorded RM16.9 billion in approved investments in 2025, involving 59 projects expected to create 12,461 jobs.

Foreign investment accounted for RM14.6 billion, or 86.3 per cent, while domestic investment made up RM2.3 billion.

The momentum has continued into 2026, with Mida reporting RM218.5 billion in total approved investments in the first half of the year, including RM51.3 billion in manufacturing.

Of the manufacturing total, the E&E industry attracted RM16.6 billion, making it the largest category.

Why is the industry growing?

One major reason is the rapid expansion of AI, which requires enormous computing power and increasingly sophisticated chips.

Demand is also being driven by data centres, electric vehicles and advanced electronics.

Malaysia’s semiconductor exports rose from RM141.23 billion in January-April 2025 to RM212.12 billion in the same period of 2026, according to figures cited in a parliamentary reply by the Investment, Trade and Industry Ministry (MITI).

The increase reflects stronger global demand for semiconductors, including for AI-related applications, data centres and automotive and industrial sectors.

But attracting investment is only part of Malaysia’s semiconductor ambitions.

How is Malaysia trying to move up the value chain?

A simplified semiconductor supply chain runs from design to wafer fabrication, packaging, testing and eventually the finished product.

Malaysia has traditionally been strongest towards the back end, but the government now wants to develop greater capabilities in integrated-circuit design, advanced packaging, semiconductor manufacturing equipment and research and development.

Its goals are set out in the National Semiconductor Strategy (NSS), launched in 2024.

The NSS targets RM500 billion in combined domestic and foreign semiconductor investment by 2030, the development of Malaysian semiconductor companies capable of becoming global champions and the training of 60,000 high-skilled Malaysian engineers.

It also includes initiatives involving advanced packaging, IC design start-ups and a semiconductor park.

The strategy is therefore not simply about attracting more factories, but expanding Malaysia’s role across more parts of the semiconductor value chain.

From manufacturing to chip design

The shift towards higher-value activities can be seen in Malaysia’s partnership with British semiconductor technology company ARM Limited.

Under a four-year national partnership announced in 2025, the programme aims to train 10,000 semiconductor professionals and give selected Malaysian companies access to ARM technology and intellectual property.

On August 21, Economy Minister Akmal Nasrullah Mohd Nasir said four companies had entered the design and IP-evaluation stage, while eight ARM technology access packages had been offered to five Malaysian companies.

The government is targeting locally manufactured chips developed through the ARM collaboration to enter production by 2030.

Akmal had said companies receiving the technology access could take about three years to develop their chip designs before production.

This illustrates the difference between attracting a manufacturing facility and developing semiconductor technology.

The government is also expanding into advanced packaging, building on Malaysia’s existing strength in assembly and testing while moving into more sophisticated technologies increasingly needed for AI and high-performance computing.

What does this mean for jobs?

The shift towards higher-value semiconductor activities could create greater demand for engineers, chip designers, researchers and skilled technicians, while giving Malaysian companies opportunities to develop and own more intellectual property.

Mida has also said its latest investment figures show a shift in semiconductor investment from back-end assembly towards front-end design and equipment, which it described as part of the operationalisation of the NSS.

For students considering a career in the industry, the pathway can begin with a strong Science, Technology, Engineering and Mathematics (STEM) foundation at school, particularly in mathematics, physics, chemistry and computer science.

At university level, relevant courses include electrical and electronic engineering, electronic engineering, microelectronics, semiconductor and integrated-circuit design, computer engineering, mechatronics, materials science and physics.

Students can also enter the industry through polytechnics, community colleges and technical and vocational education and training (TVET) programmes, which can provide more hands-on training for roles such as semiconductor technicians, equipment technicians and manufacturing and testing specialists.

Depending on their interests, students could pursue chip design through backgrounds such as microelectronics or integrated-circuit design, while manufacturing, testing and equipment roles offer opportunities for engineering and TVET graduates.

These pathways could lead to careers ranging from technicians and engineers to chip designers, researchers and semiconductor equipment specialists.

What are the challenges?

Malaysia’s electronic components sub-sector also remains heavily reliant on foreign investment, which accounted for 86.3 per cent of approved investment in 2025.

The country also faces competition from other economies seeking the same investments and talent, while the semiconductor industry remains vulnerable to global economic cycles, trade restrictions and geopolitical tensions.

Training enough engineers — and retaining them in Malaysia — will also be crucial as the country tries to move from being a major semiconductor manufacturing base to a bigger player in chip technology and other higher-value activities.