Don’t ignore smaller economies in the semiconductor supply chain. The chipmaking hubs of Taiwan and South Korea get plenty of attention as the home of leading-edge chip manufacturing, while the U.S. and Japan are spending billions to revive their domestic chip sectors. But places like Malaysia, Singapore, and the Philippines are also trying to carve an important niche in the semiconductor supply chain.
The Southeast Asian country of Malaysia has a long history with chips, as the home of U.S. chipmaker Intel’s first-ever non-U.S. plant. It has about 13% of the global market for chip packaging, assembly, and testing, according to a government report.
Now, Malaysia’s government is signaling its intent to move away from the low end of the chip supply chain—and the tech rivalry between the U.S. and China could help the Southeast Asian country stand out.
“We’re seeing a lot of end users now diversifying their supply chain,” Malaysia‘s minister of finance II, Amir Hamzah bin Azizan, told CNBC on the sidelines of the IMF spring meetings in Washington on Wednesday. The minister continued that Malaysia wanted to provide “very vibrant, strong supply-chain connectivity.”
Chips are a focus for the Southeast Asian country, with Prime Minister Anwar Ibrahim telling the Financial Times in March that advancing the country’s semiconductor industry and workforce was a “critical goal.”
Chip companies have poured money into Penang, long the home of Malaysia’s semiconductor industry. These include firms like Austria’s AMS Osram, which deals with light sensing technologies, and Chinese companies that specialize in semiconductor equipment manufacturing. The Malaysian state received $12.8 billion in foreign investment last year, more than what it got between 2013 and 2020, according to the Financial Times.
Malaysia is not targeting advanced chip manufacturing itself, but rather services that enable production.
Amir Hamzah, in his comments to CNBC on Wednesday, suggested that Malaysia wasn’t planning to tackle “the tail end of the high-end competition,” unlike the U.S. and its focus on leading-edge chip manufacturing.
The Malaysian official also told the television network that he didn’t think the country’s chip ambitions will cause a rift with China, its largest trading partner. “There is enough growth that will go around,” he said.
China doesn’t yet produce advanced chips at scale, but holds a sizable chunk of the global market for less-advanced legacy chips.
As the tech rivalry between the U.S. and China intensifies, companies may be looking for alternatives to protect themselves from any potential geopolitics-related disruption. Neighboring Singapore, which also has a long history in the semiconductor industry, is attracting multibillion-dollar investments from firms like GlobalFoundries and United Microelectronics Corp.